Buzz It Up News

Super Thursday: Bank of England keep rates on hold at 0.25pc


The downgrades, linked to Brexit, were enough for the majority of the Monetary Policy Committee to vote to keep official borrowing costs at their all-time low of 0.25 per cent, according to minutes from their meeting released on Thursday.

"The market took the decision as pretty dovish, probably because the. vote suggests the MPC is a little further away from hiking than it was last time", said ETX Capital analyst Neil Wilson.

Furthermore, the Bank cut its annual GDP forecasts for 2017 and 2018 to 1.7% and 1.6% respectively from the previous 1.9% and 1.7%.

Central banks around the world have struggled to wean their economies off the stimulus of rock-bottom interest rates, largely because of weak wage growth for workers.

The Bank held the base rate by five to three in June but since then Kristin Forbes, who voted for a rate rise, has left and been replaced by Silvana Tenreyro.

"Brexit downside risks are larger than the MPC can formally acknowledge, which keeps the bar for a pre-2019 rate hike high, in our view", analysts at the bank said in a note to clients.

In the United States, the Federal Reserve is on course to raise short-term rates later this year, while the European Central Bank is to begin phasing out its huge bond-buying programme in 2018.

Under normal circumstances, faced with inflation above target and rising while unemployment is at its lowest level in over 40 years, the bank would already be raising interest rates.




The MPC's forecasts are based on the assumption of a smooth exit from the European Union with Carney arguing it is in both sides' interests to have a clear transition to "whatever the end state is".

Lukman Otunuga, research analyst at FXTM, also highlighted how with political uncertainty, soft economic fundamentals and ongoing Brexit concerns weighing heavily on the United Kingdom economy, investors may start to question whether the BoE moves forward with raising rates in 2018.

GBP/USD remains on the lower ground, around 1.3150.

The Bank said it saw GDP growth of 1.7 per cent this year, down from 1.9 per cent it projected in May.

"Of course, it could perhaps be that traders are only concerned with the near-term expectations of the BoE given its history of bad forecasts and the sheer amount of uncertainty in the economic outlook due to Brexit". Inflation, which will peak at about 3 per cent in October, will slow to around 2.2 per cent in 2020, just above the bank's 2 per cent target.

Policymakers agreed however to increase cheap lending for retail banks before the expiry of the Term Funding Scheme next February.

The latest Inflation Report from the Bank of England made for some glum reading for sterling bulls, although the weakening in the pound helped to propel the FTSE 100 to its highest level since 26 July.

The government sets the Bank an inflation target of 2% but the rate is now above that at 2.6%, with policymakers expecting it to pick up and peak around 3% in the autumn on the consumer prices index (CPI) measure.

Related Articles

  • Police investigate body in freezer

    Police investigate body in freezer

    Police were immediately alerted and recovered the frozen remains, kept in "more than one bag", according to the complaint. She was listed as missing on the OH attorney general's website . "She was the new girlfriend", Lantz told Buzzfeed.
    Casey Affleck's estranged wife files for divorce

    Casey Affleck's estranged wife files for divorce

    In 2001, they both performed in the play This Is Our Youth with Matt Damon , another member of the Affleck pair's inner circle. In the docs, she lists their date of separation as November 2015 - although they didn't announce the split until March 2016.
    HTC Standalone VR headset launches in China

    HTC Standalone VR headset launches in China

    The headset will only see a limited release at first though, with plans to only launch in China for the time being. The wireless and standalone version of the Vive will use Qualcomm's current flagship mobile SoC.
  • PlayStation 4 Sales Tumble for the First Quarter of 2017

    PlayStation 4 Sales Tumble for the First Quarter of 2017

    Net Sales - 1.98 trillion yen ($17.92 billion) in net sales , up 4.76% from April's 1.89 trillion yen ($17.10 billion) forecast. The surge in profit reflected the recovery for image sensors from damage from an quake sustained a year ago , said the company.
    White House divisions on display with Scaramucci's comments

    White House divisions on display with Scaramucci's comments

    Priebus' position was far from tenable well before his simmering feud with Scaramucci exploded into full public view, however. He was said to be frustrated over an alleged strategy by Mr Trump's lawyers to discredit or curb the investigation.
    Hybrids Will Not Be Banned In 2040

    Hybrids Will Not Be Banned In 2040

    A new generation of electric vehicles is set to replace them, and there's a push for electric cars in NZ too. Zero emission goal " We'd certainly not produce that amount of electricity by wind".
  • Miami Dolphins Quarterback Ryan Tannehill Leaves Practice After Suffering Apparent Leg Injury

    Miami Dolphins Quarterback Ryan Tannehill Leaves Practice After Suffering Apparent Leg Injury

    In a game against the Arizona Cardinals last December, Tannehill sprained his ACL and MCL, which ended his 2016 season . The Miami Dolphins open up their preseason schedule against the Atlanta Falcons on Thursday, August 10.
    Seahawks sign safety Kam Chancellor to 3-year extension

    Seahawks sign safety Kam Chancellor to 3-year extension

    Chancellor, 29, has been Seattle's starting strong safety since 2011 and one of the key locker room leaders. Chancellor was entering the final year of his contract and is now signed through the 2020 season.
    Bill Browder: I Suspect Fusion GPS Gives 'Incentives' to Journalists

    Bill Browder: I Suspect Fusion GPS Gives 'Incentives' to Journalists

    The hearing on Wednesday pertained to violations by Fusion GPS of the Foreign Agents Registration Act, otherwise known as FARA. Republican Senator Lindsey Graham of SC said the Putin government was not committed to any particular US political party.
  • The Secret Superstar trailer review

    The Secret Superstar trailer review

    Aamir's film revolves around a Muslim teenager from a conservative family who harbours the dream of becoming a rockstar. But having just watched her on screen, doe-eyed yet feisty, it wasn't hard to place Zaira Wasim even with a burqa on.
    Mauricio Pochettino Promises Summer Transfer Window Activity

    Mauricio Pochettino Promises Summer Transfer Window Activity

    Mauricio Pochettino hasn't added to his side this transfer window but he has identified Barkley as a possible addition to strengthen his squad.
    Donald Trump Blocks Chrissy Teigen on Twitter (Read the Final Straw)

    Donald Trump Blocks Chrissy Teigen on Twitter (Read the Final Straw)

    Even though Trump has blocked Teigen on Twitter, in 2012 she revealed that she unfollowed him on the social media network. Over the past couple of months, she has tweeted various things to Trump, including "You are a national embarrassment".

Comments