Bank of England votes 7-2 for no-change

26 March, 2018, 01:10 | Author: Pamela Mathis
  • Mark Carney

The BOE said Thursday that a majority of officials on its nine-member Monetary Policy Committee agreed to keep the central bank's benchmark interest rate steady this month at 0.5%.

"Recent snow-related disruption was likely to have a measurable adverse effect on growth in the first quarter, although it was hard to quantify the precise extent of this", the Bank's Monetary Policy Committee (MPC) said.

In its February projections, the Bank of England said it expects inflation to remain above target for another year or two, supporting predictions for at least one more rate hike this year.

There will be two factors to focus on - the BoE's minutes for its latest Monetary Policy Committee (MPC) meeting, and the press conference given by BoE Governor Mark Carney.

Pound to Australian Dollar Exchange Rate Forecast: Will GBP/AUD Rise Further on BoE Interest Rate Decision?

No economist polled by Reuters expected the Bank of England to follow up on its rate hike in November - its first since 2007 - with a rate hike at its March meeting.

For the two dissenters on the MPC - Ian McCafferty and Michael Saunders - this was enough to trigger the need for an immediate rate rise, according to the minutes.

The bank increased its base interest rate from 0.25% to 0.5% in November last year, having previously failed to raise rates in more than a decade as a response to the financial crisis. UK GDP growth in the fourth quarter was revised down slightly, to 0.4%, with the composition of demand implying less rotation towards net trade and business investment than anticipated at the time of the February Report.




The UK´s unemployment rate has meanwhile dipped, reverting to the lowest level since 1975, after a brief rise. "The firming of shorter-term measures of wage growth in recent quarters and a range of survey indicators suggest pay growth will rise further in response to the tightening labour market", the MPC said.

The BoE voted by 7-2 to leave rates on hold.

The Bank of England said this had given a boost to sterling.

Average wage growth has also moved closer to inflation meaning consumers are not seeing wages decrease whilst the costs of goods increase.

The UK central bank is not expected to adjust interest rates from their current 0.5% level, but the Pound could still advance if there are hints of an upcoming interest rate hike.

Regarding Brexit, the minutes said that "developments regarding the UK's withdrawal from the European Union - and, in particular, the reaction of households, businesses and asset prices to them - remain the most significant influence on, and source of uncertainty about, the economic outlook".

"As a member of the Monetary Policy Committee, I need to be open minded about the way fintech could impact the economy of the United Kingdom", he said.

"It is very hard to read into these minutes any clues that the MPC is trying to downplay a May rate hike", he said.

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