UPDATE 3-Bank of England slashes jobless forecast, sows confusion over guidance

UPDATE 3-Bank of England slashes jobless forecast, sows confusion over guidance
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Wed Nov 13, 2013 5:57am EST

By David Milliken and Costas Pitas

LONDON Nov 13 (Reuters) – Britain’s unemployment rate will fall much faster than previously expected due to a strengthening economic recovery, the Bank of England said on Wednesday, but it stressed that it was in no hurry to raise interest rates.

Governor Mark Carney committed in August to keep interest rates at a record low 0.5 percent until unemployment fell to 7 percent – something the BoE predicted at the time could take three years.

But in a new set of brighter economic forecasts, the central bank said unemployment could hit 7 percent in the last three months of 2014, around two years earlier than it expected in August.

“For the first time in a long time you don’t have to be an optimist to see the glass is half full. The recovery has finally taken hold,” Carney told a news conference after the bank published its quarterly inflation report.

However, the central bank stressed that its Monetary Policy Committee was not about to raise interest rates any time soon, as headwinds remained, particularly from the euro zone.

“The MPC’s intention (is) to maintain the exceptionally stimulative stance of monetary policy until there has been a substantial reduction in the degree of economic slack,” it said.

Carney reiterated that a fall in unemployment would not be an automatic trigger for an increase in interest rates.

Sterling jumped and British government bond prices fell to their lowest level in four weeks as investors adjusted to the Bank’s new, shorter timeframe for when unemployment might fall to its threshold for considering an interest rate hike.

Financial markets – which were sceptical about the BoE’s August unemployment forecast – had been pricing in a rise in BoE interest rates around early 2015.

But if interest rates rise as the market expects, growth will be weaker and unemployment will prove slower to fall, the BoE predicted, saying that in this case its mean forecast was for unemployment to stay above 7 percent until the end of 2016.

Data published earlier on Wednesday showed Britain’s unemployment rate fell to 7.6 percent in the three months to September, edging close to the Bank’s threshold.

The BoE said that its central forecasts were now all based on market interest rate expectations, but that did not mean that it believed these rate expectations were correct.

Nonetheless, on this basis it expects inflation to fall below its 2 percent target at the start of 2015 – six months earlier than it had expected in August.

It also revised up its growth forecasts for this year and next. It sees 0.9 percent growth in the last three months of 2013, taking full-year growth up to 1.6 percent compared to 1.4 percent forecast in August. For 2014 it expects annual growth of 2.8 percent, compared to 2.5 percent predicted in August.

Britain’s economic output remains well below pre-crisis levels, however, unlike in most other major economies, and the belief that there is a large amount of unused capacity in Britain is what makes the BoE want to keep rates on hold.

Unlike private-sector forecasters, most of the BoE’s Monetary Policy Committee are convinced that weak labour market productivity will rebound sharply as growth picks up, allowing rapid expansion without creating much extra demand for workers.

Britain’s unemployment rate was nearer 5 percent before the financial crisis, and deputy governor Charlie Bean suggested last month that the 7 percent threshold could be lowered if domestic inflation pressures appeared muted.

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Reuters: Bonds News

Read more about UPDATE 3-Bank of England slashes jobless forecast, sows confusion over guidance and other interesting subjects concerning Bonds at TheDailyNewsReport.com

Syria decision sparks confusion

It is still unclear when an authorization vote might occur. | AP Photo

President Barack Obama’s announcement Saturday to seek congressional authorization on military action in Syria quickly won praise from Capitol Hill, where frustration had mounted over potential unilateral use of force in response to the escalating crisis.

Still, it is unclear when that authorization vote would occur. Senate leaders are considering coming back to Washington early, according to senior aides. Meanwhile, House Republican leadership said in a joint statement that they expect its chamber to consider an authorization measure the week of Sept. 9, a timeline that would give Obama time to “make his case to Congress and the American people.”

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“Under the Constitution, the responsibility to declare war lies with Congress,” said Speaker John Boehner, House Majority Leader Eric Cantor, House Majority Whip Kevin McCarthy, and House Republican Conference Chairwoman Cathy McMorris Rodgers. “We are glad the president is seeking authorization for any military action in Syria in response to serious, substantive questions being raised.”

(See POLITICO’s full Syria coverage)

But Senate leaders have made no decision yet, according to aides. The second-ranking Senate Republican, John Cornyn of Texas, has called for senators to return early to Washington to vote on an authorization measure. One top Senate aide said the White House will send the authorization proposal to Congress later Saturday.

An even bigger question: whether any authorization measure would pass Congress. A senior House Democratic aide said “it’s not clear at all” whether the White House would be able to to win authorization of use of force in Syria. But because lawmakers are scattered away from Washington during the annual summer recess, it’s difficult to do a whip count.

And given the sensitivity of the issue, is highly unlikely Boehner’s leadership team will weigh in and pressure people to vote a certain way — meaning the White House will have to whip the vote themselves.

Obama said in his Rose Garden statement that his decision to seek congressional approval had backing from the top four congressional leaders.

“The president’s role as commander-in-chief is always strengthened when he enjoys the expressed support of the Congress,” Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement.

Sen. Bob Corker (R-Tenn.), the ranking Republican on the Senate Foreign Relations Committee, also said he was “very pleased” with Obama’s decision to seek Congress’s approval.

”At this point in our country’s history, this is absolutely the right decision, and I look forward to seeing what the Administration brings forward and to a vigorous debate on this important authorization,” Corker said. “Further, now that the president has decided to use force and seek authorization, it is imperative that he immediately begins using every ounce of his energy to make his case to the American people.

And Sen. Tim Kaine (D-Va.) said he “strongly supported” the president’s decision.

“The opportunity to fully debate this difficult situation will help educate the American public about the important issues at stake and ultimately provide a political consensus that our servicemembers must be able to rely on,” he said in a statement.

New York Rep. Eliot Engel, the top Democrat on the House Foreign Affairs Committee, urged Boehner to call the House back into session “immediately.”

“The president has laid out a strong and convincing case to the American people for action in Syria,” Engel said. “However, I understand his desire to seek explicit authorization to do so from Congress.

Others criticized Obama’s move. New York Rep. Peter King, the hawkish Republican who formerly chaired the House Homeland Security Committee, said in a statement that Obama was “abdicating his responsibility as commander-in-chief and undermining the authority of future presidents.”

“The President does not need Congress to authorize a strike on Syria,” King said. “If Assad’s use of chemical weapons against civilians deserves a military response, and I believe it does, and if the President is seeking congressional approval, then he should call Congress back into a special session at the earliest date. The President doesn’t need 535 Members of Congress to enforce his own red line.”

POLITICO – Congress

Syria decision sparks confusion

Coalition of Confusion... (RT)

Coalition of Confusion... (RT)