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Interest rate review is a tightrope walk for the Bank of England Bank of England walks the tightrope over interest rates
(about 4 hours later)
Slower economic growth and higher inflation present Bank of England policymakers with a delicate balancing act when they meet this week to set interest rates and agree new forecasts for the UK as it goes through an election and Brexit talks.Slower economic growth and higher inflation present Bank of England policymakers with a delicate balancing act when they meet this week to set interest rates and agree new forecasts for the UK as it goes through an election and Brexit talks.
The Bank’s monetary policy committee (MPC) is widely expected to keep interest rates at their record low of 0.25% to offer continued support to the economy and the jobs market.The Bank’s monetary policy committee (MPC) is widely expected to keep interest rates at their record low of 0.25% to offer continued support to the economy and the jobs market.
Economists forecast that just one policymaker, Kristin Forbes, will vote for a rate rise, sticking to the position she adopted at the last meeting in March amid worries about inflation picking up too fast. The rest will opt to leave policy unchanged, according to a Reuters poll of City economists.Economists forecast that just one policymaker, Kristin Forbes, will vote for a rate rise, sticking to the position she adopted at the last meeting in March amid worries about inflation picking up too fast. The rest will opt to leave policy unchanged, according to a Reuters poll of City economists.
Alongside its decision on Thursday, the Bank will publish updated forecasts in its quarterly “inflation report”, incorporating a host of new developments since its last outlook in February. Compared with that previous report, inflation has been higher than the Bank predicted and growth has been lower as squeezed consumers rein in spending. On top of that, the government has officially opened Brexit negotiations with the rest of the EU and called a snap general election for June.Alongside its decision on Thursday, the Bank will publish updated forecasts in its quarterly “inflation report”, incorporating a host of new developments since its last outlook in February. Compared with that previous report, inflation has been higher than the Bank predicted and growth has been lower as squeezed consumers rein in spending. On top of that, the government has officially opened Brexit negotiations with the rest of the EU and called a snap general election for June.
“The MPC will have to acknowledge that it is confronted with a slightly more difficult trade-off for policy-setting than previously, but we don’t foresee a change from its core neutral stance,” said Sam Hill, senior UK economist at RBC Capital Markets.“The MPC will have to acknowledge that it is confronted with a slightly more difficult trade-off for policy-setting than previously, but we don’t foresee a change from its core neutral stance,” said Sam Hill, senior UK economist at RBC Capital Markets.
Weighing up how the eight policymakers at this week’s meeting will vote, Victoria Clarke, an economist at Investec, noted that minutes from the March meeting in March showed worries about inflation went beyond Forbes. The rest of the committee also appeared to be more open to considering tighter policy, she said.Weighing up how the eight policymakers at this week’s meeting will vote, Victoria Clarke, an economist at Investec, noted that minutes from the March meeting in March showed worries about inflation went beyond Forbes. The rest of the committee also appeared to be more open to considering tighter policy, she said.