Bank of England maintains policy rate

Posted May 12, 2018

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.

"CPI (consumer price index) inflation fell to 2.5 percent in March, lower than expected at the time of the February Report".

The Bank of England's (BoE) Monetary Policy Committee has voted by a majority of 7-2 to maintain the policy rate at 0.5 percent, according to a statement released Thursday. Their forecasts for the year were reduced principally to take into account the lower than expected performance that has already been and gone - growth predictions for subsequent years remain unchanged.

Sterling on Friday headed for its fourth successive weekly decline versus the dollar, in what would be a first for the currency since 2015, after the Bank of England held rates and cut its economic growth projections.

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The bank made no change in its forward guidance, with the MPC's statement reiterating that it expects Bank Rate to rise. The MPC did underline that there were exceptional circumstances presented by Brexit, which is set to occur next March within the forecast horizon that the MPC considers.

The Bank of England will make its interest rate decision in August without seeing the official second quarter GDP figures, which could have a critical bearing on the vote.

The announcement comes just weeks after observers seemed nearly unanimous in their predictions of a May rise in interest rates.

"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 the weeks leading up to the actual decision, there had been some speculation that the Bank would act to tighten monetary policy on the back of Governor Mark Carney's comments, but it has been odds on for some time that the MPC would delay a rise until (probably) August. Quilter Multi-Asset portfolio manager and head of investment, Anthony Gillham, said: "Just a few weeks ago a rate rise was seen as close to certain, with 90% of the market predicting a hike".