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Last statistics about the UK, published this Tuesday, became better than expected. It means that economic growth has more active paces, and can be a reason for BOE raise rates earlier than market expect.
GDP for the second quarter has increased by 0.7%. It is now the second economic index on growth paces among countries of G7 after the US GDP. Global revision of the data showed that stronger growth, before correction, had been observing since 2011 until 2013.
Revised data also showed that GDP declined to 2.6% in annual calculation. Recession in 2008 became the sharpest cut of economy, and further recover would be the slowest in the history of statistics.
Now BOE is confident in its future and close to raise rates, as investors expect. According to market, rates will remain unchanged until mid-2016, but bank’s members hint about earlier terms.
Last BOE’s minutes stated that external risks and unstable situation in global economy had put insignificant impact on the UK’s economy and positive outlooks. The Last data may become a factor, that UK’s economy would solve tightening of monetary policy without harm.
Strong GDP can explain in some way UK productivity puzzle. Strong growth of employment does not influence growth of productivity. Taking into account that productivity per hour became higher than expected, BOE has more positive outlooks and necessity to raise rates becomes small. This means that growth of productivity leads to growth of wages, not freezing inflation.
The only thing is to observe next indexes and comments from BOE.