Sterling dips as weaker United Kingdom wage growth keeps pressure off BoE

The data kept alive expectations that United Kingdom interest rates will probably head higher in the third quarter of next year. Through its trifecta of monetary policy updates - a rate decision, meeting minutes and quarterly inflation report - the BOE signaled it's in no rush to lift its key lending rate from a record low of 0.5% where it's been sitting since March 2009.

"Sterling was a big theme last week" in the BOE Inflation Report, said Jane Foley, senior foreign-exchange strategist at Rabobank worldwide in London.

Mr. Haldane has struck a dovish tone on policy since joining the rate-setting Monetary Policy Committee in June past year, sometimes in contrast to the more-bullish assessment of the U.K.'s prospects from Governor Mark Carney and other officials. So with inflation now forecast to remain below the 2 per cent target for the next two years, it is likely the next movement in base rate will come in the latter half of 2016 at the earliest. "The MPC seemed broadly happy with the market rate curve which predicts the first rate increase around the end of that year", he said.

Britain's housing market is "broken", the Bank of England's chief economist Andy Haldane said on Thursday, in an unusually forthright criticism of the lack of new homes being built. This amount of money has not increased for many years, but as each bond they own reaches maturity (ie the bank gets its money back) the Bank of England has chosen to immediately replace the bond that matures with another bond of the same value, keeping the size of the quantitative easing programme at £375 billion, even as the state of the economy changes. By end-2018 it will still only be 2.0%.

Both the US Federal Reserve and the Bank of England are grappling with the question of whether to raise interest rates for the first time in years, and they're both tantalizingly close to doing so.

Pollsters were split as to whether a stronger pound was a worry for the British economy. Fifteen of 27 were concerned or very concerned while 12 were not concerned.

In a speech that highlighted downside risks and increasing uncertainty, Haldane said there was more evidence of a "gentle slowing" of United Kingdom and world growth since the summer and that a further loss of momentum might push expansion below trend and add pressure on already-muted prices.

The Consumer Price Index now stands at 0.1%.