‘The medium-term inflation forecast is lower and that’s why markets have taken it as dovish.’ — Alan Clarke, Scotiabank
At its latest policy meeting, the Bank of England’s Monetary Policy Committee voted by a majority of 7-1 to leave the bank rate at 0.25%, with Kristin Forbes being the only one favouring an immediate hike in rates on the back of an uptick in pipeline inflation pressures that, in her opinion, has pushed the CPI to somewhat uncomfortable levels. Overall, the ‘no move’ came as no surprise, as the vast majority of economists were not expecting to see any change in the monetary policy. In the report, the BoE said that sustainability of the current loose policy would to a great extent depend on inflation expectations holding steady. Despite that, some of the MPC members commented they would give up their dovish stance relatively soon should they see any signs of an upside momentum establishing in GDP or inflation. In the meantime, the British Central Bank also decided to maintain its government bond-purchase programme at £435B, while holding corporate bond-buying plans at up to £10B. Furthermore, there also were some alterations to the Bank’s UK economic forecasts, with officials slashing their 2017 growth outlook to 1.9% from 2%.
