Stronger sterling, disappointing Q1 data and continued uncertainty over Brexit negotiations has seen the Bank of England’s monetary policy committee vote 7-1 to hold rates at 0.25 per cent.
Kristin Forbes, who is due to leave the Bank in June, was the one MPC member who voted to increase rates to 0.5 per cent.
The MPC voted unanimously to continue with the £10bn programme of sterling non-financial investment-grade corporate bond purchases and £435bn UK government bond purchases.
It also downgraded UK growth forecasts to 1.9 per cent from 2 per cent previously, but upgraded next year’s forecast from 1.6 per cent to 1.7 per cent.
Rain Newton-Smith, CBI chief economist, says the “wait-and-see” approach follows slower growth in the first quarter, tepid wage growth and signs that household spending is coming under pressure.
“There are mixed messages on economic momentum, with survey indicators pointing to stronger growth than official data.
“Any changes to monetary policy are unlikely in the near future, particularly amid ongoing uncertainty over the impact and outcomes of EU negotiations.”
Ian Kernohan, economist at Royal London Asset Management, adds the recent recovery in sterling has helped to limit upside inflation risk.
“In their latest report, the MPC have not altered their signal that policy can respond in either direction as changes to the economic outlook unfold. However over the medium term they note that monetary policy could need to be tightened by more than currently implied by markets.”