Published: Sat, May 12, 2018
World Media | By Cesar Oliver

Bank of England to hold rates after data downturn

Bank of England to hold rates after data downturn

CPI inflation is now 2.5 percent, according to the latest figures for March.

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 quarterly inflation report (IR) noted that CPI had "fallen back more quickly than expected" at the time of the last quarterly report in February.

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. Accordingly, the Bank has trimmed its full year growth forecast (issued in February) down from 1.8% to 1.4%.

After months of signals that, finally, rates were to begin to rise, the MPC kept Bank Rate at 0.5pc.

In a Reuters poll published on Wednesday, all but three of 62 economists polled between May 3 and 8 expected no change in rates.

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

The Bank of England (BoE) today chose to keep interest rates at 0.5% in measured response to relatively weak economic data for 1Q2018.

In contrast to what the Office for National Statistics said when commenting on poor Q1 growth, the Bank is of the opinion that the current "soft patch" is due to the late and hard winter disruption caused by "The Beast from the East" in March.

In minutes of the MPC meeting, the Bank said: "Weakness in the data for the first quarter had been consistent with a temporary soft patch, with few implications for the current degree of slack or for the outlook for the United Kingdom economy".

The pound recovered somewhat on Thursday after Bank of England Governor Mark Carney told the BBC that he expected a rate rise over the course of the next year if there were no shocks to the economy.

Archer noted that the MPC had indicated in its minutes that it believed growth in the first quarter was greater than the initial estimates, pointing towards an upward revision when more data becomes available to about 0.3 percent, which is in line with recent rates of growth.

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