Bank of England keeps rates at record low as economy slows

  • Bank of England keeps rates at record low as economy slows

Bank of England keeps rates at record low as economy slows

Instead she was joined by Ian McCafferty and Michael Saunders.

The Bank of England interest rate was once again held at 0.25 per cent, but there are signs a rate rise may not be far away. In May inflation hit 2.9%, as measured by the consumer prices index.

The Monetary Policy Committee (MPC) of the National Bank of Georgia (NBG) met on June 14, 2017 and chose to keep the refinancing rate unchanged at 7 percent.

The central bank is facing the uncomfortable trade-off between supporting a slowing economy under strain from weaker consumer spending, while making sure price growth doesn't get out of hand. Figures this week showed workers were suffering the biggest squeeze on their pay since 2014.

After the meeting the Bank will publish its decision and the meeting minutes which offer a valuable insight into the thinking of the committee.

Economists had expected a 7-1 split, with the soon-to-depart Kristin Forbes the lone voice calling for higher rates.

Although raising interest rates to cool inflation is seen by many as a practical strategy there are fears it may end up pressuring borrowers and eroding business confidence. And while no one is precisely sure what kind of Brexit lies in store, most economists would agree that most of the risks are tilted to the downside.

"CPI inflation has been pushed above. target by the impact of last year's sterling depreciation", the BoE added Thursday. Indeed, the MPC noted that it was striking that recent wage growth remained notably weak compared with historic norms.

That's now causing some uneasiness among members of the Monetary Policy Committee. The first is that this is not the first time some MPC members have argued for higher rates, and then later changed their minds.

Ben Lord, manager of the M&G UK Inflation Linked Corporate Bond Fund, certainly saw no reason why the bank's governor Mark Carney would increase rates from current historic lows.

Finance minister Philip Hammond has yet to announce replacements for Forbes and for former deputy governor Charlotte Hogg, who quit earlier this year after lawmakers criticised her failure to declare a potential conflict of interest. Forbes leaves the committee later this month and investors are awaiting an announcement on her replacement.

Consequently, it seems likely that the bank will not only leave rates unchanged but that the composition of the vote will not shift either. "Members may also be expecting that this period of high inflation will start to fade as year on year currency devaluation effects and increase in underlying energy prices roll out of the inflation basket".

"We recently brought forward our forecast for the first BOE hike from 2019Q2 to 2018Q4, but our conviction about the precise timing is low given complications around Brexit negotiations, which have only increased following the election".