Bank of England maintains policy rate

Bank of England maintains policy rate

Bank of England maintains policy rate

This is partly down to the assessment that part of the sluggish growth over the first quarter of this year was partly related to the bad weather when the "Beast from the East" hit slowing down economic activity.

The Bank's forecasts are still based on financial market expectations for three rates rises over the next three years, with one seen later in 2018 followed by another in 2019 and one in 2020, to bring inflation back to the 2% target in two years.

The Inflation Report added inflation had fallen back "more rapidly than expected" at its February meeting, with "pass-through of the past depreciation of sterling to import prices" is "somewhat smaller than previously thought". The following month, two of the BoE's nine Monetary Policy Committee (MPC) members voted for an increase to 0.75 percent.

Bank of England Governor Mark Carney said on Thursday that interest rates are likely to rise by the end of this year, speaking shortly after the central bank kept borrowing costs on hold in May.

But the bank's caution is not expected to last indefinitely.

That was in line with forecasts from economists polled by Reuters in the past week.


"The tone of the MPC minutes and the forecasts contained in the May IR point very much to the BoE delaying rather than abandoning a gradual tightening of monetary policy", Dr Howard Archer chief economic adviser to the EY ITEM Club, told Xinhua.

CPI Inflation now sits at 2.3% and earlier predictions of solid economic growth through this year had led many to expect the Bank to vote to increase the base rate from 0.5%, where it has been for much of the past 8 years, bar a dip to 0.25% during 2017.

Archer further noted that the MPC expected growth to improve in the second quarter to 0.4 percent over the quarter, and return to a growth rate around 1.75 percent over the medium term, a little above the official data body the Office of National Statistics (ONS) estimate of annual growth capability of about 1.5 percent.

"Despite a run of soft data, the economy may turn out to be more robust than recent evidence, and the Bank's newly lowered forecasts, suggest", he said.

In February, Carney said rates might need to rise somewhat faster than markets had expected, given the country's long-term productivity problems.

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