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Bank of England to keep its main interest rate unchanged at 0.5%

Bank of England to keep its main interest rate unchanged at 0.5%

The BoE's decision follows the Federal Reserve's 21 March announcement it would raise USA interest rates by 25bps in Jerome Powell's first meeting as chairman since taking over from Janet Yellen.

No economist polled by Reuters expects the BoE to follow up on its rate hike in November - its first since 2007 - at its March meeting.

The Bank of England's Monetary Policy Committee (MPC) has voted by a majority of 7-2 to keep United Kingdom interest rates at the present level of 0.5 per cent.

"The best collective judgment of the MPC remained that, given the prospect of excess demand over the forecast period, an ongoing tightening of monetary policy over the forecast period would be appropriate", the minutes of the March meeting said. Members Ian McCafferty and Michael Saunders, both of whom were the first two to call for an increase in rates in 2017, were the two dissenters.

The Bank of England has kept interest rates unchanged at 0.5%.

The bank's announcement was largely in line with market forecasts, although most BoE watchers expected a unanimous decision from the MPC to leave policy alone.

The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.

One bright spot: The panel noted that a squeeze on consumers from meager wage growth and high inflation triggered by a steep fall in the pound after 2016's Brexit vote appears to be fading.




Rate-setters also said future increases were likely to be "gradual" and "limited".

As such, the Reserve Bank of Australia (RBA) is now seen as unlikely to be considering near-term monetary policy adjustment.

In a speech given at HMT's International Fintech Conference yesterday, the Bank of England's deputy governor, Dave Ramsden, said the Hub will be a central point of contact for the fintech sector to engage with the Bank.

Seven of the BOE's nine officials voted to hold off for now, arguing that incoming data on growth and inflation don't yet justify another rise.

"The rate rise made in November felt like a straightforward reversal of the emergency post-Brexit cut, but this now feels more like we're entering a genuine tightening phase at the Bank".

Earlier this month, Bank of England Governor Mark Carney said crypto-currencies such as bitcoin had failed as a form of money, but he said the technology could improve the financial system in future. While UK retail sales lifted strongly in February by 0.8%, more than expected (most economists had penciled in a 0.4% climb), much of the February sales lift was down to supermarket sales growth rather than broader high-street shopping (bear in mind the demise of Maplin and Toys R Us).

This was a departure from the unanimous vote at February meeting and came as somewhat of a surprise given much of the market that had pencilled in another unchanged vote.

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