There was good news for the Bank of England this week as UK unemployment fell to 7.4% in the three months to October, the lowest rate since 2009, and inflation hit a four-year low of 2.1% in November.
However, minutes from the Bank's December meeting revealed that members of the interest-rate setting Monetary Policy Committee (MPC) were starting to worry about the strength of the pound. Sterling is near a five-year high against other major currencies.
What the commentators said
Yet even if unemployment does hit 7% soon, the December meeting minutes suggest the central bank is in no hurry to raise rates. On that front, "the benign inflation outlook will enable the MPC to keep interest rates on hold for a long time yet".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Households will also welcome the slowdown in the rate of inflation rising consumer prices have squeezed spending, said Hugh Pym at BBC News. But they can't count their chickens yet.
One factor leading the drop in the inflation rate was food prices prices were little changed in November, whereas in the same month of last year they rose. But increases in the cost of living are still running ahead of average pay rises, and the November inflation figures do not take into account the latest increases in utility bills.
However, the Bank's concerns about sterling suggest it might be more worried about disinflationary pressures, said Kathleen Brooks of Forex.com. While the Bank shows no sign of intervening yet, if the pound heads towards the 1.70 level against the dollar, it may act a strong pound looks "like the biggest threat to the UK's recovery right now".
-
Which investment trusts could benefit from lower interest rates?As vehicles for long-term investments, many investment trusts were hit when interest rates rose in 2022. With interest rates expected to fall by the end of the year, could now be the time to invest in one of these unloved sectors?
-
How to protect your personal and financial data from cyber attacksM&S and the Co-op are the latest retailers to suffer from cyber hacks but consumers also need to be vigilant
