The Bank of England (BoE) released its quarterly inflation report on Wednesday. The BoE upgraded its growth forecast from 3.4% to 3.5% in 2014, and from 2.9% to 3.0% in 2015.

Unemployment rate is expected to drop to 6.0% this year, while inflation is expected to be just below 2 per cent over the next three years.

On another side, the central bank cut its forecast for wage growth in 2014. The BoE lowered its forecast to 1.25% from 2.5%. Wage growth is expected to remain below inflation.

The BoE revealed its revealed downward revisions of its wage growth forecasts after the release of the official labour market data earlier in the morning. The average earnings index, including bonuses, dropped by 0.2% in the three months to June, missing expectations for a 0.1% decrease, after a 0.4% rise in the three months to May. The last month's figure was revised up from a 0.3% gain. That was first negative average earnings index since March-May 2009.

The weak average earnings index may mean that the Bank of England will delay interest rate hike.

The BoE said it will focus more on wages in its assessment of "spare capacity". The central bank revised down its forecast of spare capacity in the economy from 1-1.5% to 1%.

The Bank of England Governor Mark Carney said that when the BoE starts to hike its interest rate, it will do so in a "small, slow" manner.

Mark Carney added that "sustained economic momentum is looking more assured", and "the economy is returning to a semblance of normality".