• gradual path of rate rises likely to be appropriate to eliminate slack over 2-3 years
  • first rate rise around Q2 2015
  • above 2% by Q1 2017

More highlights coming as GBP rallies on the news

  • sees scope for economy to absorb more spare capacity before MPC raises rates even after unemployment falls to 7%
  • when economy is back to normal appropriate level of interest rates likely to be well below 5%
  • BOE will reinvest proceeds of maturing QE gilt holdings at least until it starts to raise rates
  • CPI to hit trough of 1.7% in March
  • CPI forecast 1.9% in 2016 as prev forecast
  • interest rate curve shows faster tightening than Nov
  • growth forecast sees 2014 GDP +3.4% and 2015 +2.7%, 2016 +2.8%
  • ONS prelim estimate for Q1 GDP revised up to +0.9% vs +0.8%
  • BOE has revised down forecasts of productivity growth due to weak response so far to higher GDP
  • UK recovery has gained momentum, underpinned by revival in confidence and easier credit
  • business investment is subdued but recent data suggests its likely to gather pace this year.

An overall cautious report from Carney & Co but better growth forecasts and timing if rate rise gives GBPUSD a lift to 1.6540 from 1.6460

Full report here