The Bank reported the forecast for the expected official interest rate using market-based rates derived from the price of overnight index swaps, and these showed a slight increase in market expectations of interest rates in Q2 of 0.6%, from 0.5% previously, implying a greater possibility of a hike. Economists had forecast core CPI climbing by 0.2%. All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent. It was down 0.2% at $1.3527 as of 12:58 pm in London.
Two members of the committee - Michael Saunders and Ian McCafferty - said rising pay caused by falling unemployment required an immediate increase in interest rates.
According to Reuters, "Britain's economy grew more slowly than most of its peers previous year after a Brexit-driven jump in inflation hit consumer spending power and some businesses delayed long-term investment". Growth slowed even more sharply in early 2018 due to a mix of unusually icy weather and headwinds from Britain's impending European Union exit. Surveys have suggested little rebound last month.
After a slew of poor economic data in recent weeks, the central bank now expects the United Kingdom economy to grow by a paltry 1.4 per cent this year - markedly lower than the 1.8 per cent it had previously pencilled in. For now, most policymakers wanted to wait to be sure that the weakness passes quickly. Adding an interest rate hike would possibly tip the economy in recession territory.
Tepid growth was one of the reasons why the bank opted against hiking rates at this month's meeting, as Carney had indicated just three months ago was likely.
Whilst the Bank of England (BoE) did not have early access to today's data, it could still effect the sentiment of Bank Governor Mark Carney in his later press conference and indeed the outlook moving forward.More news: Of Rihanna's Best Fashion Moments At The Met Gala
But the bank's caution is not expected to last indefinitely.
A lack of progress on Brexit and data from the British Retail Consortium showing the sharpest fall since the BRC started collecting retail sales data 23 years ago have added to the economic pessimism.Investors and traders will therefore be listening out for any hints by Carney that a rate rise in August is on the cards; now market pricing suggests the chances of an increase are around 57%.
Bank of England Governor Mark Carney has defended himself against a charge that his public comments on interest rate moves lack credibility.
The pound fell today to approach four-month lows against the dollar after the Bank of England held rates steady as expected but cut its growth and inflation projections for this year and next.
United Kingdom economic growth has almost flatlined in recent years.