Bank Of England Keeps Record Low Rate, Signals Hike In Coming Months
14 Septembre 2017 - 10:31AM
RTTF2
The Bank of England retained its record low interest rate on
Thursday, but hinted at raising rates over the coming months to
bring inflation back to the target.
The Monetary Policy Committee voted 7-2 to hold the interest
rate at a record low 0.25 percent. But all nine members voted to
maintain the quantitative easing at GBP 435 billion.
Ian McCafferty and Michael Saunders maintained their call for a
quarter point rate hike at the meeting. The new member Dave Ramsden
preferred to keep the rate unchanged.
Economists had also expected BoE chief economist Andrew Haldane
to join the hawks after inflation shot up to 2.9 percent in August,
which was the joint highest in over five years.
According to the BoE minutes, some members said a withdrawal of
part of the stimulus injected in August last year would help to
moderate the inflation overshoot, while leaving monetary policy
very supportive.
The BoE continues to expect inflation to overshoot the 2 percent
target over the next three years. Although underlying pay growth
has shown some signs of recovery, growth remains moderate, the bank
said.
Since the August Inflation Report, data suggested slightly
stronger picture than anticipated, the bank noted. Further, spare
capacity in the economy is being absorbed a little more rapidly
than expected in August.
If the economy were to follow a path broadly consistent with
August Inflation Report, all members said monetary policy could
need to be tightened by a somewhat greater extent than current
market expectations.
All members agreed that any prospective increases in Bank Rate
would be expected to be at a gradual pace and to a limited
extent.
Policymakers said there remain considerable risks to the
outlook, which include the response of households, businesses and
financial markets to developments related to the process of EU
withdrawal.
ING Bank economist James Knightley said he does not rule out the
possibility that the BoE reverses last August's emergency rate cut
quite soon, but economic uncertainty relating to Brexit and the
risks this poses for activity means that such action would not be
the start of a new tightening cycle.
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