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The Bank of England (BoE) will release the interest rate decision later in the day. Analysts forecasted the BoE should keep unchanged interest rates at 0.50%. The BoE asset purchase plan should remain at 375 billion pounds.
Last year, the BoE announced that the interest rate remain unchanged until unemployment decline to at least 7.0%. The unemployment rate plunged to 6.9% in March.
The UK economy is continuing to grow, but the growth was weaker than expected. The GDP was up 0.8% in the first quarter. The annual rate of growth increased to 3.1%. It is fastest rate of annual growth since the fourth quarter of 2007. The projected quarterly rate was 0.9% and an annual growth of 3.2%.
The U.K. services PMI climbed to a four-month high of 58.7 in April from 57.6 in March. Analysts had expected an increase to 57.9.
There is a problem of rising house prices in the U.K. The Organisation for Economic Co-operation and Development said the central bank should intervene to address risks of excessive house price inflation. The Bank of England already warned that the recent house price increase could end in a crash. There are different possibilities to handle this problem: to raise interest rates or to toughen lending rules.
Good economic data and increasing house prices
speak for the interest rate hike, but it is unlikely that it will be done this
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