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Bank of England keeps rates unchanged

12 May, 2018, 23:16 | Author: Ted Wilson
  • Mark Carney

The Bank of England adjusts the base rate in accordance with the general economic climate in order to either encourage saving or spending with the general aim of maintaining a prosperous and stable economy.

On Friday the currency rose 0.1 percent versus the dollar at $1.3533 and increased 0.1 percent against the euro at 88.090 pence.

That has led to a dramatic reversal in market expectations. However, at the same meeting during which the Bank's MPC voted to hold interest rates steady, they also downgraded their forecast for the year's economic growth from 1.8% to 1.4%. In an April 18 poll, 69 of 76 had a 25 basis point increase penciled in.

Sterling fell on the news and was trading lower by 0.2% against the U.S. dollar at 1.352.

Heavy snow slowed economic growth in much of Europe in March.

Britain's economy grew more slowly than most of its peers a year ago, after a Brexit-driven jump in inflation hit consumer spending power and some businesses delayed long-term investment.

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Moreover, subsequent surveys of business and consumer activity showed little rebound in April - adding support to the view of Britain's statistics agency that the slowdown in first-quarter growth to 0.1 percent was largely unrelated to the weather.

This is largely down to a recent set of figures that showed that the United Kingdom economy grew by just 0.1% during the first quarter of 2018.

Overall, he said, the BoE was sticking to its message that rates would probably need to rise - for only the second time in over a decade - once that recovery was clear.

"The MPC acknowledged that inflation had fallen faster than expected in the first quarter, which it attributed primarily to the impact of the past depreciation of sterling fading a little faster than previously thought", said Archer.

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. On the other hand, the BoE revised down its inflation forecasts both in the short and medium term, while reducing growth this year by 40bps. Higher interest rates exert downward pressure on inflation, and lower interest rates push it up.


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