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By FXCompass — Wednesday, 21 April 2010

April’s Monetary Policy Minutes revealed an optimistic view about the state of the UK’s economy. For many of Bank of England’s MPC members, downside risks are now less threatening than what they were in February.

The BOE noted improvements in the manufacturing and service sectors as well as a pickup in UK’s trading activities. It still forecasts a boost in GDP over the coming year lead by imports, which profit from a weak sterling.

The Monetary Policy Committee voted unanimously to keep bond purchases at GBP200 billion and key interest rate at 0.5% in the first week of April.

MPC members noted the increase in inflation, which jumped to 3.4% in March. It expects upside inflation pressure to remain “in the following months” amid an increase in oil prices and the weaker sterling. However, it remains cautious about downward inflationary pressures, which hide beneath the short term factors.

On the downside, the BOE underlined the slow recovery in the Eurozone, its main trading partner.

“Looking ahead, there remained a number of factors restraining activity and inflation. These included the impairment of the banking sector, the need for fiscal consolidation in the United Kingdom and elsewhere, and despite some recovery in activity, the continuing degree of spare capacity in the economy.” the bank added.

Unemployment

Amongst other news in the UK, we note the release of the unemployment rate which reached its highest level in more than 15 years when it came out at 8.0%. However, UK's jobless claimants dropped more than expected (-32.9K), which improved the labor market prospect and signalled a strengthening recovery.