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MPC votes 6-2 to hold Bank Rate at 0.25%

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    MPC votes 6-2 to hold Bank Rate at 0.25%

    Taken from the Financial Reporter

    The Bank of England’s Monetary Policy Committee has voted by a majority of 6-2 to maintain Bank Rate at 0.25%.

    The Committee said reasons include sluggish GDP growth and a squeeze on households’ real incomes, but a rate rise is still expected in the near future.

    The MPC said that if the economy follows a path broadly consistent with its preditions, "monetary policy could need to be tightened by a somewhat greater extent".

    The Committee said its projections are conditioned on a range of possible outcomes for the UK’s new trading relationship with the European Union and the required adjustment period, which monetary policy cannot offset.

    CPI inflation rose to 2.6% in June from 2.3% in March, as expected. The MPC expects inflation to rise further in coming months and to peak around 3% in October.

    Inflation is projected to remain above the MPC’s target, reflecting "entirely the effects of the referendum-related falls in sterling".

    In its minutes, the MPC said: "Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years.

    "Attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth. For this reason, the MPC’s remit specifies that, in exceptional circumstances, the Committee must balance any trade-off between the speed at which it intends to return inflation sustainably to the target and the support that monetary policy provides to jobs and activity."

    Richard Sexton, Director at e.surv commented: “One year on from the MPC committee’s historic rate cut and the Bank of England has decided to keep the base rate at 0.25%. However, with the current political and economic uncertainty, it is not a question of if, but when will rates eventually rise. It’s interesting to consider that for many current mortgage holders, they have never experienced a rate rise and the impact of any payment shock is unknowable at this time.

    Matthew Brittain, Investment Analyst at Sanlam UK, added: “Weakened economic activity and moderating inflation has allowed the Bank of England to take a more measured approach to tightening monetary policy, a step back from the hawkish shift we saw last month. This marginally more dovish sentiment has no doubt been helped by the departure of long-time hawk Kristin Forbes, and puts the BoE firmly back on track to its ‘slow and steady’ normalisation approach."

    #2
    Who'd have thought it eh?

    UK ZIRP policy has no end in sight.
    First Law of Contracting: Only the strong survive

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      #3
      Only 6-2? I expected 8-0.

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