BoE policy will not be tightened until there is “a meaningful dent in unemployment.” GBP/USD weakens

FXstreet.com (London) - In a speech at Northumbria University today, David Miles – member of the Bank of England’s Monetary Policy Committee – argued that, while recent improvements in economic data are welcome, the slack in the economy generated by several years of underperformance means that people should not expect monetary policy to quickly return to normal: “Provided inflationary pressures do not head in the wrong direction, monetary policy will not be tightened until the recovery is sufficiently strong and sustainable to make a meaningful dent in unemployment.”

Miles’ comments align with the dovish tones taken by Band of England governor Mark Carney, who earlier this month reaffirmed that the Bank of England would not consider a change in policy until unemployment rates break below 7 percent.

Miles argued that it is important to distinguish between the economy returning to more normal growth rates and the economy being back at a more normal level of economic activity: “If that level of activity is significantly below a rate consistent with controlled inflation – as I believe is the case in the UK today – then it does not make sense to quickly return monetary policy to a more normal setting once growth moves to more normal rates.”

Sterling dipped earlier today after fellow Bank of England MPC member Ben Broadbent expressed concern about the outlook for the UK economy, despite recent steady improvements in macro data.

GBP/USD is currently trading at USD1.5983, from highs of USD1.6046.