A lower than expected unemployment rate (6.6% vs 6.8% prev) coupled with still anaemic wage growth (0.9% y/y ex-bonuses) do little to help clear the fog over the outlook for BoE policy.
The data is still consistent with a gradual reduction of slack in the labour market but with wages under control and labour force participation rising there is no need for the BoE to rush for the exit.
We continue to believe that the BoE wants to make an attempt at using its macroprudential tools through the FPC as opposed to hiking interest rates due to worries that the housing market could be a source for future instability.
The BoE has made it clear that the issue is one of supply and something that the government needs to deal with but policies that encourage demand are likely to be diluted.
An announcement is likely to be made by the FPC with the release of the Financial Stability Review on June 26.
We could get some insight into the interaction of the FPC and the MPC from Governor Carney at a speech at the annual Mansion House dinner on Thursday evening.
We stick with our view that the BoE will not hike rates until Q2 2015.