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Why the Bank of England May Move Before the Fed

Signs are clearer in Britain that inflation may soon pick up.
Bank of England Inflation Report News Conference
Photographer: Simon Dawson/Bloomberg

The latest rounds of data in the U.S. and the U.K. are pointing to a conclusion that few thought likely a few months ago: The appropriate time for the first post-crisis rate rise by the Bank of England may be reached before the Federal Open Market Committee votes to move.

Both central banks have been waiting for clear signs that their respective economies are moving back toward potential, with the greatest number of people in work and much of the output lost following the financial crisis recaptured. Yet while the Federal Reserve can still point to low prime-age labor force participation, a quits rate that has remained static for five straight months, and weak wage pressures to justify its inaction, the Bank of England is increasingly reliant on its optimistic productivity forecasts to make a case for holding.