11 May 2018
Interest rates held steady by the Bank of England
The Monetary Policy Committee (MPC) of the Bank of England has voted to keep interest rates on hold at 0.5%, as they report the UK has hit a ‘temporary soft patch’. They did however cut their growth forecast for the year to 1.4%, a 0.4% decrease from its previous forecast in March.
Disruption in the economy, caused by bad weather, was the reason the Bank offered for making the cut. However, Mark Carney, governor of the Bank of England remarked that it is likely rates will rise sometime this year.
Data from the Office of National Statistics also showed that in quarter one the economy grew by just 0.1%, the slowest rate since quarter four in 2012 and lower than the 0.3% growth analysts has expected.
In the minutes released by MPC, it was said:
“The recent weakness in data for the first quarter had been consistent with a temporary soft patch, with few implications…for the outlook for the UK economy.
“The costs to waiting for additional information were likely to be modest, given the need for only limited tightening over the forecast period to return inflation sustainably to the target.”
A senior economist at Hargreaves Lansdown, Ben Brettell, commented:
“The unreliable boyfriend returns. Not for the first time, Mark Carney’s policy of guiding the markets as to what to expect has backfired.
“A month or so ago it looked like a May rate rise was a near-certainty. However, we might not see a rate rise for the rest of the year.”
Carney has responded by saying he is confident that the economy will rebound in the months ahead. He believes this was the right decision for the time being, until there is more clarity on the future trading relationship between the UK and EU. He also added that interest rates will rise, but not now.