The Bank of England’s monetary policy meeting yesterday on 11th May saw the 8-member monetary policy committee voting 7 – 1, to leave interest rates unchanged at record lows of 0.25%. The BoE cut rates in August 2016.
Kristen Forbes, BoE policymaker once again voted for a 25 basis point rate hike. Policy makers, however, voted unanimously to keep the asset purchased steady at £435 billion.
Image via Bank of England
The Bank of England said that the monetary policy remained appropriate and that continuing stability of the monetary policy would depend on a mix of factors that include inflation and slack in the economy. Inflation continues to overshoot the BoE’s inflation target of 2%.
The BoE had a slightly hawkish tilt in noting that monetary policy could be tightened should there be evidence of economic growth. In this case, the central bank said that monetary policy would be tightened to a greater extent.
Speaking at the press conference, BoE Governor, Mark Carney said that wage growth remained weak and with a contrasting increase in consumer prices, households are expected to feel the squeeze. The central bank chief, however, said that wage growth could be expected to pick up eventually.
BoE Publish Inflation Forecasts
The BoE also published fresh inflation forecasts and growth outlook figures. The central bank downgraded the 2017 growth forecasts to 1.9% from 2% previously and growth for the second quarter is estimated at 0.4%. The central bank cited weaker household spending would post a drag on consumption.
For 2018, however, growth projections were hiked from 1.6% previously to 1.7% and 1.8% for 2019.
On inflation, policymakers said that they expect inflation to continue to rise above the central bank’s target in the coming months and would peak just under 3% by the end of the fourth quarter this year.
The central bank raises the 2017 inflation forecasts to 2.7% from 2.4% previously, and for 2018, it expects inflation to rise to 2.6%, up from 2.2% that was forecast previously.
