United Kingdom exchange traded fund investors can breathe a little easier after Bank of England reassured markets that it will push back plans to raise rates and help support a growing economy.
The iShares MSCI United Kingdom ETF (NYSEArca: EWU) was up 0.3% Thursday. EWU has gained 4.7% over the past week but is still down 1.1% year-to-date.
The market expected the BOE to hike rates from its current record low of 0.5% once unemployment dipped below 7% – the jobless rate now stands at 7.1%. However, the BOE has amended its stance, pointing to rate hikes once pay growth and labor productivity increase, reports Shan Li for the Los Angeles Times.
“The message to businesses, to households is that the Bank rate is going to follow a path that is consistent with jobs, with incomes and with spending growing in a sustainable way,” Bank of England Governor Mark Carney said at a news conference Wednesday, Reuters reports. “We are going to calibrate it carefully. We are not going to take risks with this recovery.”
Consequently, Britain’s central bank will be maintaining its record low benchmark rates.
“Bank rates may need to stay at low levels for some time to come,” Carney said.
The central bank upwardly revised growth projections for 2014 to 3.4% from 2.8%. Inflation has declined unexpectedly to the 2% target, and BOE expects inflation to fall to 1.7% in March before moving back to 2% next year.
The British pound sterling touched a two-week high against the U.S. dollar as investors looked to rate hikes next year. According to J.C. Parets for All Star Charts, the British pound is testing a five-year resistance level at $1.659, with a short-term resistance level from October that date back to 2012 around $162.5 as a new found support. The CurrencyShares British Pound Sterling Trust (NYSEArca: FXB) was up 0.4% Thursday, and the ETF is 0.1% higher-year-to-date.
iShares MSCI United Kingdom ETF
For more information on the U.K., visit our United Kingdom category.
Max Chen contributed to this article.