Will the UK economy win the World Cup?

"Securing the recovery is like making it through the qualifying rounds of the World Cup - it's a real achievement, but not the end goal. The prize in the economy is sustained and prolonged growth."

This was the view of the Governor of the Bank of England (BoE), Mark Carney revealed yesterday.   

In the latest inflation report from the BoE, the Bank stated that the economy "has started to head back towards normal". It upgraded its growth forecasts for next year, predicting growth of 2.9%, up from its previous forecast of 2.7% three months ago, but left its growth forecast for 2014 unchanged at 3.4%.

At the same time, the BoE said that interest rates will remain at the current record low level until next year at least, as it believes that there is enough room for the economy to grow without pushing up inflation. However, Mr Carney said the economy has "edged closer" to the point where interest rates would need to rise.

His comments saw a fall in the value of the pound against the dollar, as market expectations had been that the Bank would signal a possible rate rise before the election.

The Bank has also upgraded its forecasts on unemployment, predicting now that the unemployment rate would fall to 5.9% in two years, compared with its earlier prediction that the rate would remain above 7% for a few years.

This followed on from the latest official jobs data, which showed that the unemployment rate was 6.8% in the three months to March, its lowest level since early 2009.

The Bank also stated that it expected inflation to remain below its 2% target for the next two years. This in itself cooled expectations of an earlier interest rate rise.

There is no doubt that the UK has had a good run and that business confidence is recovering. As well as anecdotal evidence, a recent survey by the British Chamber of Commerce showed service exports to be at an all-time high and many key manufacturing measures were also at record levels. The survey did raise a few caveats too but overall it was positive news.

This general good news helped the FTSE 100 rise 3% in April to finish the month at 6,780. At close of play tonight, the FTSE 100 stood a shade higher still, at 6840.89. Of late, the UK has been at the forefront of stockmarket performers.

So overall, most of the news seems positive, but as Mr Carney said, the UK economy has made it through the qualifying rounds – we still need to win the cup!

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