Rolling coverage of the BoE's new forecasts on growth and inflation, the latest UK jobless data, the Astra takeover row....
Closing summary: Bank calms rate hike speculation
UK jobless rate hits fresh five-year low
But wages growth misses forecasts
3.57pm BST
Early finish today, given all the juicy economic news came in a rush this morning.
Here's very brisk round-up:
3.36pm BST
City analyst Louise Cooper has a good take on the Bank of England's latest batch of forecasts (which she compares to Linus's safety blanket).
Rather than all the complicated charts and diagrams so beloved of the Bank, let's just look at some simple numbers.
Between 1998 and 2007, according to BofE, the average base rate was 5%. For that same period, UK GDP grew on average at 3.2% per year, with inflation averaging 1.6% and unemployment at 5.3%. So very similar to the conditions now - CPI is 1.6%, GDP growth of 3%, although unemployment is over 1% higher now at 6.8%. But the big difference is that now, base rates are 0.5% compared to 5% - ten times the level.
By Q2 2017, the UK economy is expected to have grown 3%pa for almost four years and yet the base rate will only be 2.4%? With targeted inflation at 2%, the base rate will only just be positive in real terms. Really? After four years of 3% growth. When has that ever happened in the UK? Is that believable?
The only way this can possibly occur is by assuming the UK has a massive output gap - its retained all its skills and capacity lost during crisis and added to them in meantime. And that 4yrs of 3%pa growth will not trigger inflation. The Queen in Alice in Wonderland may have "believed as many as six impossible things before breakfast" but I can't believe just one from the MPC after lunch.
3.28pm BST
Small shareholders have vented their anger at ITV's board today over the £8m-plus package handed to CEO Adam Crozier, at its annual general meeting today.
One investor was particularly irate that Crozier was treated to a £3.95m "golden hello" -- and even chairman Archie Norman conceded that it appears "all his Christmases have come at once".
3.20pm BST
George Osborne has continued to dismiss the idea that an independent Scotland could keep a link to the pound.
@GeorgeOsborne dismisses scottish/UK monetary union as a red herring. Scots Nats muddy the waters when is clear must drop the pound
Dollarisation/sterlingisation has never been tried in any country of the size and sophistication of Scotland, says GeorgeOsborne
2.58pm BST
The pound remains lower against the US dollar, after Mark Carney poured cold water on the idea the UK economy was ready for higher borrowing costs:
Here's how the pound dipped against the dollar in the wake of today's "dovish" Inflation Report pic.twitter.com/zatX43bbNh
2.49pm BST
Watch and fashion accessory firm Fossil is being hammered in early trading. Shares are down almost 8%, after it cut its profit forecast for the second quarter of 2014 last night.
Fossil shares slide 7.6% on weak outlook
2.40pm BST
A very subdued start to share trading on Wall Street, with the main indices shuffling a little lower at the open.
After a run of recent record highs, traders may have run out of reasons to push shares up further.
S&P 500 falls 1 point; Nasdaq loses 9 points
2.22pm BST
There was quite a nasty exchange over Pfizer's bid to take over AstraZeneca at Prime Minister's question's today.
Labou leader Ed Miliband accused David Cameron of acting like Pfizer's PR man. This prompted the PM to claim Miliband was incapable of acting in the national interest, and that opposition was guilty of an "abject surrender" to Kraft over the takeover of Cadbury.
Cameron: "It's a great company to come and do business." I think he meant 'country'. Rather than Pfizer. But you never know
2.07pm BST
Some newswire snaps from German chancellor Angela Merkel:
1.55pm BST
Over in parliament, chancellor George Osborne is testifying to MPs about the Scottish independence vote.
The chancellor is reiterating that he would not support a currency union with an independent Scotland, which allowed it to use the pound.
Ian Davidson, the Labour MP who chairs the committee, goes next.
Q: Do you accept you have painted yourself into a corner. You would be destroyed if you did a U-turn after September.
1.33pm BST
John Cridland, CBI Director-General, likes what he heard from Mark Carney today:
The Inflation Report provides positive signs that the UK recovery is advancing, with broad-based growth and business investment picking up. But it is evident that growth is still not back to normal, and there are a number of political risks on the horizon.
Housing remains a concern and it is reassuring that the FPC has the mandate and a range of tools available to keep the housing market in check.
1.29pm BST
1.27pm BST
Samuel Tombs of Capital Economics reckons today's report may cool expectations of a rate rise in the first quarter of 2015:
Under the assumption that interest rates rise in line with market expectations in the first half of 2015, the Bank expects CPI inflation to remain below the 2% target in two years time. This suggests that the markets might be wrong to anticipate an interest rate rise to come as early as Q1 2015. And while the forecasts for GDP growth were raised again (the forecast for 2015 has been raised from 2.7% to 2.9%), the Governor emphasised that the economy has only just begun to head back towards normal.
Meanwhile, the Committees collective judgment is that the amount of spare capacity in the economy has only reduced slightly since Februarys Inflation Report and that it remains in the region of 1% to 1.5% of GDP. Finally, the Governor stated that monetary policy was not the right tool to use to cool the housing market and that the FPC would act first, if necessary. Accordingly, we continue to think that interest rates will remain on hold until the second half of next year, later than the markets and most economists expect.
Carney is concerned that there should be enough slack in the economy to cope with keeping interest rates low while he is also reliant on employment data which can be distorted by the inclusion of types of employment contract currently prevalent which do not necessarily result in strong gains in disposable income as economic activity picks up.
Growth and inflation forecast have not changed much from last time around. He referred to productivity still being low, and that there was still considerable slack in the labour market.
Carney went on to say that interest rates would only rise after the economy is back to normal and did not, as some commentators were expecting, directly signal when the first rate hike would occur.
The MPCs latest Inflation Report struck a dovish tone, suggesting that those expecting an interest rate rise this year are likely to be disappointed.
Despite the strength of the recovery and, in particular, the robustness of the labour market, the MPC stuck to its previous estimate that slack in the economy amounts to 1- 1½% of GDP. Indeed, it expects that this slack will be used up more slowly over the next few years than in the recent past, with GDP growth cooling and productivity growth picking up.
1.10pm BST
The City got the message from Mark Carney -- the pound has lost half a cent against the US dollar, to $1.677.
12.56pm BST
Here's Larry Elliott and Angela Monaghan on the Bank of England's attempts to squash talk of an imminent interest rate rise:
Policymakers at Threadneedle Street used the Bank's latest quarterly inflation report to signal that it remained in no rush to raise rates, with the first rise expected around the time of the general election in the second quarter of 2015. Bank rate has been on hold at the all-time low of 0.5% since March 2009 and the governor Mark Carney said on Wednesday any rate rises would be "gradual and limited".
The report said it was not yet clear whether the recovery was on a sustainable footing. The forecasts showed members of the rate-setting monetary policy committee still believe there is 1-1.5% of spare capacity in the economy to be used up, following the UK's below-par performance at the onset of the crisis in 2008.
12.33pm BST
So, what did we learn from the Bank of England from today's quarterly inflation report, and press conference?
12.30pm BST
Here's a video clip of Mark Carney at today's Quarterly Inflation report, discussing the UK economy and future interest rate rises:
12.08pm BST
Even David Smith, the Sunday Times economics editor, was left scratching his head somewhat after Mark Carney's performance:
Not the clearest message on interest rates from the Bank of England, though reluctance to pull the trigger too soon shone through.
11.59am BST
Sean Farrell: Universities and science minister David Willetts was keen to say the government was taking a strong line with Pfizer.
"We want to see more R&D in the UK. That is what lies behind our life sciences strategy and... science more widely. It is one of the issues on which we press Pfizer in our discussions."
The panel pushed David Willetts to explain what government was doing to ensure any merger between these two large companies would not badly damage the UK science base. Willetts says he has taken scientists' concerns to Pfizer and listened to their assurances. Their commitments are one type of guarantee he says. The second is that the UK has the right skills and financial incentives to make the UK a good place to do RnD. Ultimately though, WIlletts' says, the decision lies with AZ's shareholders.
Graham Stringer, a conservative MP, is deeply unimpressed by what he calls a "passive" stance. He is shocked that Britain could let a hostile takeover happen that could damage the UK science base without government intervening.
11.50am BST
And that was the end of the press conference, after Carney ran amok with his sporting analogies by praising Spencer Dale, Charlie Bean and Paul Fisher - who are all leaving the Monetary Policy Committee (or in Bean's case, the Bank altogether).
They notched up plenty of appearances in the national cause, Carney said -- handily ignoring the fact that he, apparently, sent Fisher for an early bath.
Slightly awkward end to Inflation Report presser as Carney lightheartedly notes this is final one for Dale & Fisher, who hes kicked off MPC
Carney, I like you. Leave the football analogies please.
11.46am BST
Carney insists that the London economy is not as strong as people think, and can't be expected to drive the recovery on its own.
He was asked how the Bank would prioritise between setting monetary policy for the capital, and the rest of the UK.
11.41am BST
Slack in the economy is the key to when rates will go up but it's v hard to pin down...
11.37am BST
In answer to a question from the Telegraph's Jeremy Warner about inequality, Carney says that the Bank of England does recognise that conventional monetary policy, and unconventional monetary policy, does have consequences on distribution.
But targeting specific asset prices is very much not the bank's policy - it won't set monetary policy to target house prices, or the stock market, or other financial assets.
11.30am BST
Not the most explicable press conference in the BoE's 300+ year history, with a series of long answers for Carney about slack, spare capacity, future interest rate paths....
Todays Inflation Report/press conference an exercise in intentional vagueness. Carney seems to have come full circle since forward guidance
Bank of England governors: never knowingly understandable.
11.28am BST
Carney reiterates that the Monetary Policy Committee's role is to "lean in against the headwinds" pushing on the UK economy and keep interest rates at historically low levels for an extended period of time.
11.26am BST
What has the governor learned in his (almost) first year in the job?
Carney says it's a privilege to serve in a country, and an institution, that is helping to lead the healing of the global economy and the fixing of the financial system.
11.26am BST
Carney: "we're very aware of the pressures people face because of past borrowing."
11.22am BST
How concerned is the Bank about borrowers who will struggle to repay their mortgages when rates rise?
It's certainly an issue, Mark Carney says -- which is factored into the Bank's consumption forecasts.
11.16am BST
Back on the strong pound - Carney says the key is to differentiate between the impact that sterling's strength has on inflation (pushing it down, by making imports cheaper), and on the real economy (hurting exports).
Sterling's strength could have an impact on Britain's ability to get net exports rising, he adds.
11.12am BST
Carney: FPC cannot control all aspects of housing market. FPC wont build single one of the 120k houses needed. Will not target hse prices
11.11am BST
Sean Farrell: Pascal Soriot, AstraZeneca's chief executive, talked about the company's commitment to the UK, its unusually close links with academia and the potential disruption of a takeover by Pfizer.
Cambridge, as part of the "golden triangle" with London and Oxford, is the best place to conduct science in Europe and the only European competition for US centres Boston and San Francisco.
11.11am BST
Back to the UK housing market.
Carney reiterates that the Bank's FPC will not target house prices, and it certainly won't be building any of new houses itself (supply being a key factor).
11.09am BST
Carney says the Bank will "look through" the recent rise in sterling, but cautions that "persistent" sterling strength could make it harder to deliver a balanced recovery.
11.07am BST
Larry Elliott, our economics editor, take up Carney's comment that getting the UK economy back to normality is only the equivalent of getting through the World Cup qualifying rounds (see 10.45am)
Larry's watched the UK economy, and the England football team, for long enough to know that hopes can turn to tears pretty quickly.
Larry Elliott stretching the football metaphor by saying that like England the BOE may be a bit too optimistic about infl b4 the real test
10.57am BST
Carney reiterates that interest rate rises, when they come, will be "limited and gradual".
And he doesn't accept that they are likely to peak at 2%.
10.55am BST
The BOE isn't prepared to give more details about its assessment of the output cap.
Deputy governor Charlie Bean says people shouldn't get too "hung up" about it -- assessing slack is very complicated; there could be a lot more spare capacity, or a lot less, than the central forecast.
10.54am BST
Carney is asked about worries that the UK housing market is running too hot.
That's a question for the Financial Policy Committee, he says - monetary policy isn't the best way to tackle an incipient housing bubble.
10.51am BST
In the Pfizer/AstraZeneca grilling, it was conservative MP Stephen Metcalfe who got to the heart of the matter, reckons Ian Sample:
The takeover bid, at £50 a share, or around £63bn, will cost Pfizer around four times the annual sales of AstraZeneca. How will Pfizer pay for that? "Surely you are going to need more salesmen than scientists?" Metcalfe asks.
Read restated his company's commitment that should it succeed in its takeover of AstraZeneca, a fifth of the combined company's global RnD workforce - largely scientists and technicians - will be based in Britain. The key question is how large that workforce will be. Will it be smaller, or radically different in its specialites? That is what will affect the UK's science base.
Read said he suspects the research budget of the merged company would be smaller than the sum of the two budgets. The savings come because Pfizer and AstraZeneca have overlapping projects and expertise, so they can make cuts there. Pfizer has a US cancer research base on the US west coast, and that will surely have some overlap with AstraZeneca's own cancer work.
10.51am BST
"Today is not the day" Governor Carney won't be drawn on interest rate rises - but we have "edged closer" to that day.
10.49am BST
Onto questions, and Mark Carney is refusing to be pinned down on when interest rates may rise.
We will adjust rates when the economy has got back to normal, he adds.
10.48am BST
The press conference is being broadcast live here.
10.47am BST
The Guardian's science correspondent Ian Sample has been watching the Pfizer/AstraZeneca hearing. Here's his take:
Ian Read made much of his commitment to keep 20% of research and development jobs in the UK. As he understands it, the pledge to keep that proportion of jobs in the UK is written into the takeover bid, and must be honoured for five years. If the company reneges on the deal, they can be referred to the High Court which has unlimited powers to intervene, he says.
The panel pointed out that senior figures in Sweden had warned that Pfizer went back on promises made ahead of their acquisition of the biotech company, Pharmacia, in 2003. But Read dismisses these. "We honoured all the commitments we made in Sweden," he said.
10.45am BST
And Carney sums up with a sporting analogy - a favourite theme of his predecessor, Mervyn King.
The UK economy is only now at a point where it is returning to normal, he says.
Carney: Securing recovery is like qualifying for World Cup. Real tournament is about to begin. The prize is strong & sustainable growth.
10.42am BST
Carney adds that the Bank won't start unwinding its QE programme until interest rates are at a level when they could be cut, materially.
10.42am BST
On interest rates, Carney says we have edged close to the point when bank rate would gradually need to rise.
That's hardly a signal that a rise is close
10.39am BST
Mark Carney says the UK unemployment remains "significantly" above the Bank's current estimate for the equilibrium rate.
He says there is still slack in the economy, which is likely to be used up more slowly than in the past.
10.35am BST
The Bank of England has increased its growth forecast for UK next year from 2.7% to 2.9% and left its forecast for 2014 unchanged at 3.4%.
10.35am BST
Breaking: The Bank of England says that the UK economic recovery is continuing, as it releases its latest quarterly inflation report.
Mark Carney, governor, is explaining that the overall outlook is little changed since February. That means "the UK economy continues to grow strongly", adding:
In short, the economy has started to head back to normal.
10.30am BST
More details on the rise in UK self-employment:
@graemewearden Here's our chart on that trend since the crisis started... pic.twitter.com/SCbMW2LmM4
10.27am BST
Sean Farrell: MPs' questions to Pfizer homed in on its pledges to invest in the UK science base and to keep a large research and development operation in Britain.
Chief executive Ian Read said he couldn't give an estimate for the number of scientists the combined company would employ. But he admitted: "I would suspect there would be less scientists from a natural automatic combination of the two."
10.26am BST
AstraZeneca chief Pascal Soriot, meanwhile, is telling MPs that his priority is to deliver great science, based around the new Cambridge R&D site:
AstraZeneca CEO Soriot same opening pitch as y'day: stresses strategy is science led and deal cold create substantial bus disruption
AstraZeneca CEO Soriot: 'Cambridge at the heart of our science strategy'; site leader Jane Osbourn: 'v embedded in Cambridge ecosystem'
AstraZeneca R&D chief Pangalos spells out in detail the 'added complexity in bringing 2 v large successful orgs together'
10.24am BST
Back in the Thatcher Room, Pfizer boss Ian Read has admitted that a merger with Astra would probably mean fewer scientists employed to research and develop new drugs.
He's also been fending off fresh accusations that Pfizer can't be trusted:
Pfizer boss Read says he suspects there would be "less scientists" in the combined company than in two separate companies.
Pfizer boss Read says he can't give a number for how many scientists he expects to have after the merger without looking at Astra's products
Pfizer boss Read says Pfizer honoured its commitments after it bought Pharmacia in Sweden. Pharmacia science base already depleted.
Pfizer boss Read says commitments to UK are "clear and unambiguous".
10.19am BST
The unemployment data is also another chance for the prime minister to plug his #longtermeconomicplan
There's more to do, but it's welcome unemployment is down again. More jobs means more financial security for people #LongTermEconomicPlan.
10.17am BST
Minister for Employment Esther McVey says today's fall in the jobless rate shows the UK recovery is gathering pace:
"As the recovery takes hold, more people are able to get a job or set up their own business and become the employers of tomorrow.
"Each and every person who has made a new start or hired someone new is helping to make Britain a more prosperous and confident place to be.
10.15am BST
Britain's army of self-employed workers continues to grow too - indeed, over the last 12 months it's expanded faster than the number of people who've been taken on by others.
The ONS reports that
9.57am BST
UK earnings excluding bonuses +1.3%, inflation +1.6%. Earnings still being squeezed: pic.twitter.com/9ceP6gvuTJ
9.54am BST
Public sector pay continues to lag the private sector in Britain.
The Office for National Statistics reports that in the three months to March:
9.49am BST
Today's Labour Market report is online here.
9.45am BST
Not so good! UK ONS: UK average total earnings fell from £479 per week in February to £474 per week in March #GBP #GDP
Less good news on wages. Overall pay up 1.7% - now outpacing inflation (1.6%) but it's lower than expected and pay ex bonuses only 1.3%
9.45am BST
Here's the key points on today's UK unemployment data:
9.39am BST
Newsnight's Duncan Weldon flags up that wage growth was stronger in the building and manufacturing data, and in parts of the service sector.
Overall earnings growth at +1.7% but stronger in construction (+2.9%), manufacturing (+2.9%) and retail, hotels & restaurants (+3.2%)
9.38am BST
pound falls 30 pips vs us dollar as a result of the miss on UK earnings #fx #dollar
9.37am BST
But there's disappointing news on wages -- average earnings (excluding bonuses) only rose by 1.3% in the first three months to March.
That's below the inflation rate, meaning real wages still fell through the quarter. It looks like earnings stalled in March, when they only rose by 1.0% annually.
9.30am BST
BREAKING: The UK unemployment rate has fallen to 6.8% in the three months to March, the lowest level in more than five years.
9.28am BST
Nearly time for the UK unemployment data....
Once again the key with UK jobs numbers will be average earnings, especially in a climate of (relatively) low CPI
9.25am BST
GlaxoSmithKline has announced that it is "deeply concerned" about the allegations that its staff broke bribery laws in China.
This follows the news this morning that a British executive is accused of pressing his sales team to bribe doctors, hospital officials and health institutions.
"We have today met with the MPS [Ministry of Public Security] who updated us on their investigation into GSK China Ltd.
We take the allegations that have been raised very seriously. They are deeply concerning to us and contrary to the values of GSK.
China accuses British GlaxoSmithKline executive in bribery case http://t.co/90f9m6Vd9r
9.23am BST
Today's AstraZeneca-Pfizer hearing is underway, in the Thatcher Room. Here's a live stream.
Mikael Dolsten, Pfizer's President of Worldwide Research and Development, is arguing that creating a science powerhouse would deliver better results for patients, and get drugs to market faster.
9.12am BST
Here's the Reuters story that helped drag down the euro against the pound today:
Big story on the ECB today - June action all but guaranteed, taking form of rate cuts and help for SMEs http://t.co/JJ6vZYdjr2 $EURUSD
9.08am BST
The number of UK houses selling for more than £1m is now comfortably over the previous pre-crisis peak, flags up Sky News's Ed Conway:
Sales of million pound properties now well above pre-crisis levels. Blog: http://t.co/rDsHhDthX8 Graph: pic.twitter.com/ZG6MICY4Co
8.56am BST
The pound has just hit its highest level against the euro in 16 months, trading as high as 1.2297 (meaning one euro = 81.3p)
A June rate cut is "more or less a done deal", said one of the five sources who spoke to Reuters on condition of anonymity.
A second source echoed that sentiment, and added: "This will be the first major central bank to move to a negative deposit rate. That would move the exchange rate."
Euro falls to 16-month low vs sterling ahead of BoE inflation report pic.twitter.com/b0Ccjr2HeN
8.50am BST
No respite from the gloom at Sony - it posted a 138 billion yen (£800m) loss for the last quarter this morning, as cost of quitting the personal computer business piles up.
And the Japanese manufacturing giant also forecast a 50 billion yen loss for the current financial year - dashing hopes of a return to profitability after a string of recent profit warnings.
8.39am BST
Back to the Bank of England -- and Kit Juckes of SocGen flags up that interest rates could potentially rise before Christmas.
.@kitjuckes: "The UK interest rate market now sees a 2014 rate hike a distinct possibility - 15bp of hikes are priced in by Dec"
8.37am BST
AstraZeneca has fired yet another salvo in the battle against Pfizer this morning, releasing details of a new clinical study collaboration to drive some of its cancer drugs to market.
Dr. Bahija Jallal of AZ's MedImmune arm, said the partnership with US bio-tech firm Incyte will help get its drugs to market -- something it insists it can do without Pfizer's interference.
Immuno-oncology is one of the most exciting areas in our industry and we are progressing our strong pipeline as rapidly as possible. Our partnership with Incyte is further evidence of our belief that combination therapies have the potential to be one of the most effective ways of treating cancer."
Following our meeting with Pfizer's Ian Read yesterday, I will be meeting with AstraZeneca's Pascal Soriot today.
8.22am BST
The BoE could also lower its inflation forecast again (giving it more leeway to put off a rate rise), as Emma Charlton of Bloomberg flags up:
Will we see #BOE revise down its #inflation forecast today? pic.twitter.com/0sqb4NZrTS
8.21am BST
Bank of England governor Carney will also be probed about how much spare capacity remains in the UK economy, when the quarterly inflation report is published at 10.30am
The Bank's assessment of "slack" is the key factor on when borrowing costs may rise.
The MPC should make only minor changes to its growth (upward) and inflation (downward) forecasts. More important will be any update provided on the size of the output gap. Carney knows that any significant reduction would trigger a change in rate expectations.
He is not yet ready to tighten policy so only a small change in the gap is likely.
@bankofengland Inflation Report -- 63 mentions of #slack and 35 mentions of #sparecapacity in the February Report - how many today?
8.13am BST
Many City economists reckon that Britain's unemployment fell to a fresh five-year low of 6.8% in the first three months of this year (we find out at 9.30am).
And there's optimism that wages rose faster than inflation, after years of falling real incomes put the squeeze on millions of households and individuals.
8.02am BST
The Labour party has pre-empted today's unemployment data, and new growth forecasts, by warning that the top 1% of earners have overwhelmingly benefited from the pick-up in the economy.
Politics editor Patrick Wintour has the story:
Over the past year, the share of national post-tax income of the top 1% of taxpayers just 300,000 people has risen from 8.2% in 2012-13 to 9.8 % in 2013-14. Over the same period, the bottom 90% a total of 27 million taxpayers have seen their share of post-tax income fall from 71.3% to 70.4%, according to estimates contained in the latest Income Tax Liabilities Statistics published by HMRC. They cover the year when GDP growth returned and the top rate of income tax on earnings above £150,000 was reduced from 50% to 45%.
Labour will use the figures to argue that there has been no recovery for middle Britain. Chris Leslie, shadow chief secretary to the Treasury, said: "David Cameron and George Osborne are trying to claim the cost-of-living crisis is over, but these official figures expose what's really happening under the Tories. While the top 1% of taxpayers have seen their share of income after tax go up, the bottom 90% on middle and lower incomes have seen theirs fall.
7.59am BST
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