By Jason Douglas and Alex Brittain
LONDON--Bank of England officials are struggling to make sense
of a big rise in self-employment in the U.K., a development that
may affect when officials choose to lift interest rates.
At its April 9 meeting, Monetary Policy Committee officials
agreed that the U.K.'s economic recovery appears to be gaining
momentum, and BOE staff expect the economy to have expanded by
about 1% in the first quarter of 2014, according to minutes of the
meeting published Wednesday. All nine members of the rate-setting
panel voted to keep the BOE's benchmark interest rate at a low of
0.5%.
But the minutes record that officials spent some time puzzling
over recent trends in Britain's labor market and what they might
mean for inflation.
Policy makers led by Gov. Mark Carney are expected to raise the
central bank's benchmark interest rate early next year, but
officials have said the precise timing of and speed of rate hikes
will depend on how quickly spare capacity in the economy is used
up.
Officials believe much of this slack is concentrated in the
labor market, despite falling unemployment, as many Britons aren't
working as many hours as they would like.
One "striking feature" of the labor market data has been a surge
self-employment, according to April's minutes. Self-employment rose
by 200,000 in the three months to January and accounts for roughly
half of all employment gains since 2010.
Officials are unsure how far the rise reflects changing work
practices or a "disguised" form of labor market slack, the minutes
record.
The MPC's concerns underscore how central banks around the world
are grappling with changes in their economies that complicate their
interest-rate plans.
Write to Jason Douglas at jason.douglas@wsj.com and Alex
Brittain at alex.brittain@wsj.com