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LONDON (Alliance News) - Bank of England Governor Mark Carney Wednesday said the central bank still thinks interest rates will have to remain where there are for some time for come, as he changed the bank's trigger for discussing rate rises to the takeup of "spare capacity" in the economy rather than unemployment alone.

The change in the central bank's so-called "forward guidance" means it's now practically impossible for anyone outside Threadneedle Street to work out when rates may start rising. Carney said the bank will now be looking at a portfolio of 18 economic indicators when making its judgements, including things like productivity and wage movements.

The bank had previously said it would start considering rate rises when the UK unemployment dropped to 7%, but this is now expected to have happened in January. However, the bank effectively dropped this guidance last month, saying the faster-than-expected fall in unemployment hadn't been matched by increases in productivity.

Carney warned that the economic recovery is not yet balanced or sustainable and the central bank wouldn't be taking any risks with the recovery, meaning rates are likely to stay low for some time to come. It also won't start reducing its asset purchase programme until it starts raising rates.

"The first phase of guidance gave businesses confidence that Bank Rate would not be raised at least until jobs, incomes and spending were growing at sustainable rates," Carney said. "As guidance evolves, that remains the case: the MPC (Monetary Policy Committee) will not take risks with the recovery".

The comments came as the BOE also lifted its 2014 Gross Domestic Product forecast to 3.4%, from 2.8% previously, and also forecast that inflation will remain close to the 2% target

Analysts are currently predicting a first rate rise in early 2015, although the growth forecast may bring that forward.

"Overall, forward guidance has moved from a simple thing to something far more nuanced and the BOE may not raise rates until it feels in its gut that rates need to be increased, and markets are notoriously bad at reading a central bank’s gut feeling," Forex.com research director Kathleen Brooks said.

"We believe the market may start to price in the prospect of a rate hike at the end of this year, on the back of the BoE’s upgrade to its growth projections for this year and next," Brooks added.

The upgraded growth forecasts helped lift the pound to a nine-day high against the dollar and a seven-day high against the euro.

Carney's comments come a day after new Fed Chair Janet yellen, in her first testimony before Congress, emphasized continuity with the policy approach taken by her predecessor, suggesting the US central bank will continue tapering its own asset-buying programme.

Late Tuesday, the Republican-controlled House of Representatives approved a lopsided bipartisan vote to suspend the government's borrowing limit with no strings attached, raising the US' debt ceiling for one more year in order to avoid a default on government debt.

The vote marked a major backing down by Republicans and a milestone in partisan-gridlocked Washington, where the centre-right party has repeatedly blocked debt limit and budget measures. However, it also kicks a much-needed deal on reducing the country's huge deficit down the road once more.

If passed by the Senate, the bill would remove the ceiling on the current debt limit of USD17.2 trillion until March 15 2015, and would allow the Treasury Department to continue borrowing however much it needs to pay the nation's bills. The government reached the debt limit on Friday, but Treasury Secretary Jacob Lew said he could patch through until February 27.

In UK corporate news, FTSE 100 household goods producer Reckitt Benckiser has reported lower 2013 profits as it booked higher charges for legal provisions and restructuring and acquisition costs, but revenues and adjusted operating profits increased, driven by growth for its health and hygiene products.

The maker of products including Cillit Bank cleaning fluids, Dettol disinfectants, Durex condoms and Nurofen and Strepsils cold and flu remedies echoed rivals in warning that market conditions at the start of 2014 are tougher than they were a year ago, particularly in emerging markets, but said it is confident it can still grow.

The company is targeting net revenue growth of 4% to 5% at constant exchange rates and excluding the pharmaceutical business in 2014 and flat or slightly higher operating margin.

It confirmed that its emerging markets were continuing to slow, but said it had done well in China and India, while it was continuing to perform strongly in Europe and North America.

Reckitt said the strategic review of its struggling pharmaceutical business is continuing and it will provide an update during 2014.

Oil major Tullow Oil, meanwhile, said its pretax profit fell significantly in its recent full-year, due to lower disposal gains and higher exploration write-off charges. It sits at the bottom of the FTSE 100.

African Barrick Gold also reported weak results as it swung to a loss last year, but its shares are up as it also guided that costs are set to fall 19% during the current year.

In the FTSE 250, data centre provider TeleCity Group reported higher pretax profit for 2013 and hiked its dividend, but saw its shares fall sharply after the results and its 2014 outlook came in below analysts' expectations.

Chief Executive Officer Michael Tobin told Alliance News in an interview following the results, "We expect to see double digit organic growth in 2014 on the top line and continue that trajectory on the dividend side of things."

In political news, US President Barack Obama has charged that Russia is blocking the delivery of humanitarian aid to besieged Syrian communities by obstructing a vote in the UN Security Council.
Obama and French President Francois Hollande confirmed during a joint press conference that there are efforts within the Security Council to pass a resolution to ensure delivery of food, shelter, clothing and fuel, but Obama said "Russia is a holdout."

At the Geneva peace talks, international envoy Lakhdar Brahimi called on the Syrian government and opposition delegations to speed up efforts to end the "nightmare" suffered by their people.

Adverse weather continues to cause disruption and destruction in the UK Wednesday, with high winds of up to 160 kilometres per hour battering western Britain, adding fresh misery to residents already suffering from flooding and travel disruptions.

The Met Office issued a rare red warning for Wales and north-western England, saying the winds were likely to lead to structural damage and power outages. It warned people to rethink their travel plans. Speed restrictions were placed on trains in the west of Britain while flooding in Berkshire, west of London, meant that fewer than half the normal number of trains were running on a major commuter route.

Further heavy rainfall was predicted over the coming week with the West Country expected to receive more rain than it would normally get in a month. It was expected to worsen what has been one of Britain's wettest winters in years.

The south-eastern US has also been hit, as a severe winter storm packing ice and snow was moving across the region late Tuesday, prompting offical warnings. Nine states from Louisiana to Virginia were under a winter storm warning, the National Weather Service said. Portions of Georgia and South Carolina were under an ice storm warning. A state of emergency was in effect in Georgia, which was paralyzed by an ice and snow storm two weeks ago. The state government warned residents to stay off the roads.

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FTSE 100: up 0.1% at 6,679.20
FTSE 250: down 0.1% at 16,055.26
AIM ALL-SHARE: up 0.1% at 869.06
GBP-USD: 1.6518
EUR-USD: 1.3577
GOLD: USD1,289.38 an ounce
OIL (Brent): USD109.06 a barrel

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KEY UK CORPORATE NEWS:

FTSE 100: A Petrofac joint venture has won a USD3.7 billion deal to work on a clean fuels project at Kuwait National Petroleum Co's Abdulla refinery. Petrofac said its share of the deal is USD1.7 billion. ITV said it will be targeting a younger female audience with a new free-to-air channel called ITVBe that it hopes to launch towards the end of 2014. Rolls-Royce Holdings has won a new deal, worth up to USD1 billion, to supply engines for the Lockheed Martin C-130J Super Hercules aircraft. Costain Group and Babcock International Group have confirmed their joint venture, ABC Electrification Ltd, has been appointed by Network Rail as one of four suppliers to the GBP2 billion National Electrification programme, delivering electrification to more than two thousand miles of the UK's rail system. The US Food and Drug Administration has requested clinical trial data from AstraZeneca, the manufacturer of saxagliptin, to investigate a possible association between the use of the type 2 diabetes drug and heart failure. The request follows a study published in the New England Journal of Medicine, which reported an increased rate of hospitalization for heart failure with use of saxagliptin compared to an inactive treatment. The study did not find increased rates of death or other major cardiovascular risks. The founding family of grocer Wm Morrison Supermarkets has contacted private-equity funds such as CVC Capital Partners and Carlyle Group to weigh their interest in taking the retailer private, Bloomberg Businessweek reported. The family, which hold about 9% to 10% of the business, has so far been unable to find a buyout partner due to concerns about Morrison’s slow sales growth and the size of the deal, the magazine said on its website, quoting two sources familiar with the matter.

FTSE 250: WS Atkins said its outlook for the current financial year remains unchanged as it has continued to trade in line with expectations. The engineering consultancy said its UK business is continuing to trade well, driven by government infrastructure investment that's helping its rail and highway consultancy units. Investment manager Värde Management has sold about half its stake in Crest Nicholson Holdings on the behalf of funds it manages. The shares, which were placed by Barclays Bank and JP Morgan Securities, represent about 10% of Crest Nicholson's issued share capital and were sold at 369 pence each, raising about GBP92.8 million. Healthcare services provider UDG Healthcare has agreed to sell its "Specials" businesses and Arjun Products Ltd to Professional Compounding Centers of America Inc in a deal worth GBP23.5 million. 3i Group has unveiled a number of changes to the leadership of its infrastructure business, with Managing Partner Cressida Hogg set to leave at the end of March to pursue a "senior role" elsewhere. The company said it will appoint Phil White, who has been with 3i since 2007, and current Group Strategy Director Ben Loomes, as co-managing partners of the infrastructure business, 3i Investments. Essar Energy said that Mahan Coal Ltd had secured Stage 2 forest clearance from the Indian government's Ministry of Environment of Forests, for the Mahan coal block. Essar Energy has a 98.3% interest in Essar Power Ltd, which holds a 50% interest in Mahan Coal.

AIM: Accsys Technologies shares have jumped after the company reported a 71% increase in revenues for the nine months to end-December, driven by growth in demand for its Accoya wood, and said it expects the growth trend to continue. Stellar Diamonds is up after it said that further high-grade diamonds have been returned from bulk sampling at its Tongo dyke kimberlite projest in Sierra Leone. Zoo Digital Group shares have dropped after the company warned that it expects its pretax loss for the year ending March 31 to be "significantly" widened from the previous year. Revenues are now expected to come in at USD9.5 million. Rare Earth Minerals is another faller after it conditionally raised GBP4.6 million gross at 0.4 pence per share to fund the expansion of its Mexican lithium interests. Clear Leisure shares have dropped after the company announced that ORH SpA, its 73.43% owned hotel and travel company, has been placed into voluntary liquidation. The decision was made by ORH after the discovery of a sizeable, undisclosed debt position.

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AFTERNOON WATCHLIST: ECB President Draghi's Speech, US EIA Crude Oil Stocks change, US Monthly Budget Statement, Japan Domestic Corporate Goods Price Index

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Thursday's Key UK Corporate Events

Helical Bar Interim Management Statement
Norcros Interim Management Statement
Imperial Tobacco Group Interim Management Statement
Tate and Lyle Interim Management Statement
Liberty Global Q4 Results
Oxford Instruments Interim Management Statement
Rolls Royce Holding Full Year Results
Shire Full Year Results
AMEC Full Year Results
Rio Tinto Full Year Results
Lancashire Holdings Q4 Results
New World Resources Full Year Results
Lloyds Banking Group Full Year Results
Morgan Advanced Materials Full Year Results
Eros International Q3 Results
SVG Capital Full Year Results

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Thursday's Key Economic Events

00:01 UK RICS Housing Price Balance
07:00 Germany Consumer Price Index
09:00 EU ECB Monthly Report
13:30 US Initial Jobless Claims
13:30 US Retail Sales
15:00 US Business Inventories
15:00 US Fed's Yellen Speech
15:30 US EIA Natural Gas Storage change

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By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance and Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1

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