02/05/2019

The MPC predicts that, if the economy develops broadly in line with its Inflation Report projections, a tightening of monetary policy would be necessary.

“The MPC continues to be cautious in its approach, waiting until the Brexit outcome is clearer before raising rates further.”

The Bank of England’s Monetary Policy Committee has voted unanimously to maintain Bank Rate at 0.75%.

The Committee’s May Inflation Report now predicts that Bank Rate will rise to around 1% by the end of the forecast period in 2022, lower than in the February Report.

CPI inflation was 1.9% in March and is expected to be slightly further below the MPC’s 2% target during the first half of the forecast period.

The MPC predicts that, if the economy develops broadly in line with its Inflation Report projections, a tightening of monetary policy would be necessary to return inflation to the 2% target.

GDP is predicted to have grown by 0.5% in 2019 Q1 but is expected to slow to around 0.2% in Q2. The Committee says the subdued pace reflects the impact of the slowdown in global growth and ongoing Brexit uncertainties.

It added that Brexit is having a “particularly pronounced impact on business investment”, which has been falling for a year.

Frances Haque, UK Chief Economist at Santander, commented: “Given the continued uncertainty over the timing and nature of Brexit, the decision to hold rates will not be a surprise to the market.

“While growth in the first quarter of this year looks set to be stronger than previously expected, the MPC continues to be cautious in its approach, waiting until the Brexit outcome is clearer before raising rates further.

“It now looks increasingly unlikely that we will see a rate rise this year.”

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