logo
Plus   Neg
Share
Email

BoE Maintains Status Quo; Signals Early Rate Hike

BOE-020818-lt.jpg

The Bank of England decided to stand pat on rates on "Super Thursday" as widely expected, but hinted at somewhat earlier- and deeper-than-expected rate hikes.

The central bank raised its near-term growth projections, citing strengthening global growth, and forecast inflation to remain above 2 percent target over the forecast horizon.

At the rate-setting meeting, the Monetary Policy Committee, governed by Mark Carney, unanimously voted to maintain the benchmark rate at 0.50 percent. The bank had previously raised its key rate in November 2017, which was the first hike in a decade.

Policymakers also unanimously decided to maintain the quantitative easing at GBP 435 billion.

All members thought that the current policy stance remained appropriate to balance the demands of the MPC's remit, the minutes showed.

The committee judged that monetary policy would need to be tightened somewhat earlier and by a somewhat greater degree over the forecast period than anticipated in order to return inflation sustainably to the target.

In the Inflation Report, the bank said GDP growth was projected to remain around its current pace, a slightly stronger near-term outlook than in November, underpinned by strengthening global growth.

The UK economy was forecast to expand 1.7 percent by the first quarter of 2018 and 1.8 percent by early 2019 and again 1.7 percent over the succeeding two years.

At the same time, the fall in consumer price inflation was projected to be more gradual in the near term than expected at the time of the November Report. And it was possible that CPI inflation could rise back above 3 percent temporarily, the bank noted.

Inflation is forecast to be remain close to 3 percent by the first quarter of 2018, before slowing to 2.3 percent by first quarter of 2019. The bank expects inflation to slow marginally to 2.2 percent by early 2020.

The bank observed that wage growth appears to be picking up. Annual wage growth will be boosted over coming months as the weakness of pay in late 2016 and early 2017 drops out of the annual comparison, BoE noted.

Latest releases pave the way for an interest rate hike in May, Paul Hollingsworth, an economist at Capital Economics, said. The economist expects the MPC to hike rates two times this year, taking Bank Rate to 1.25 percent.

by RTTNews Staff Writer

For comments and feedback: editorial@rttnews.com

Economic News

What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.

Follow RTT