Bank of England holds United Kingdom interest rates at 0.5%


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.

The Bank of England's Monetary Policy Committee have voted 7-2 to maintain Bank Rate at 0.5%, the same ratio as in its last meeting.

Significantly, the central bank dismissed most of the slowdown in the first quarter GDP growth as being temporary and continued to envisage a rebound in the second quarter GDP growth. "However what it will depend on is the degree to which the economy recovers from the Q1 dip and how it compares to the Bank of England's forecasts over the rest of the year". Carney has been labeled an "unreliable boyfriend", having already in the past flagged up a rate hike only to back out later.

The prediction would signal a change of thinking for the Bank.

"They expect us not to be on some pre-set course".

The majority of the MPC noted the recent weak numbers and said there wasn't much cost to waiting to assess the economy more fully.

Investors appear unclear as to what's likely to happen next.

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The committee meets monthly to discuss whether to cut, raise or leave interest rates unchanged, as well as other measures such as quantitative easing.

"So yet again we have to digest another change of tack from Bank of England policymakers", said Michael Hewson, chief market analyst at CMC Markets.

"Given the recent weakness in consumer credit and the housing market, there was somewhat greater-than-usual uncertainty about the near-term momentum in consumer spending and the extent to which households would adjust their spending and saving to the past fall in their real incomes", the minutes said. Inflation fell faster than the BoE had expected and the economy grew at its slowest annual rate in five years in early 2018.

Carney told reporters on Thursday the bank's earlier guidance on tighter policy had been conditioned on February inflation projections but the economy had not fulfilled those conditions.

The Office for National Statistics is scrapping the first of its three GDP estimates starting in July.

"If you're in a world where you have limited and gradual rate increases over time, you have some flexibility on the timing of when you do those", Carney said. But "there was value in seeing how the data unfolded over the coming months", they added. In the year to March, annual consumer price inflation was 2.5 percent, well below the bank's projection of nearly 3 percent.

The European Central Bank may now wait until after June to outline its next steps, while the Bank of Japan recently played down when it will reach its 2 percent inflation target. The Inflation Report showed that about one quarter-point hike a year will be needed to return inflation to the goal after the first increase in a decade last November.