5 to 3 the Doves have it – MPC holds interest rate at 0.25%
The Bank of England’s Monetary Policy Committee (MPC) have voted 5 to 3 to hold the Bank of England base rate at 0.25%.
This victory by the Doves over the Hawks was closer than expected even with inflation reaching a recent high of 2.9%. Current levels of inflation were not perceived by many to be a long term issue as the fall in Sterling is now feeding through in increased import prices without upward pressure on wage and demand led domestic inflation.
The MPC reported on the decision saying:
“The assessment depended importantly on three main judgements: that the lower level of sterling continues to boost consumer prices broadly as projected, and without adverse consequences for inflation expectations further ahead; that regular pay growth remains modest in the near term but picks up significantly over the forecast period; and that more subdued household spending growth is largely balanced by a pickup in other components of demand.
CPI inflation has been pushed above the 2% target by the impact of last year’s sterling depreciation. It reached 2.9% in May, above the MPC’s expectation. Inflation could rise above 3% by the autumn, and is likely to remain above the target for an extended period as sterling’s depreciation continues to feed through into the prices of consumer goods and services. The 2½% fall in the exchange rate since the May Inflation Report, if sustained, will add to that imported inflationary impetus.
In contrast, pay growth has moderated further from already subdued rates, even as the unemployment rate has fallen to 4.6%, its lowest in over 40 years.”
The MPc also voted unanimously to maintain the stock of sterling non-financial investment grade corporate bond purchases at £10 billion, and to maintain the stock of UK government bond purchases, at £435 billion.
All members of the MPC agreed that if there was a future need to increase the Bank base rate that it would be gradual and limited to ensure a medium term target of 2% inflation.
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Member Since February 2017 - Comments: 21
12:46 PM, 20th June 2017, About 9 years ago
Taken directly from Mark Carney’s statement this morning:
“Whatever happens, monetary policy will be set to return inflation sustainably to target while supporting as best it can the necessary adjustments in the economy”
Clearly telling us that, although right now the time is not right for rises, if inflation continues then interest rates WILL be used to attempt to curb inflation.
Plain as day in black and white.
Member Since August 2016 - Comments: 1190
1:20 PM, 20th June 2017, About 9 years ago
You should have learnt by now Charles not to take anything Carney says at face value. The guy is clueless. For example he told us in his “forward guidance” that rates would rise when unemployment falls below 7%. What a joke that was. Then at the end of 2015 that rates would go up “at the turn of the year”. In fact later in 2016 he reduced them – after forecasting catastrophe for the economy if we voted Leave. He’s a weazel and a quisling.
Black and white ?? Really ??
But I suppose according to you I’m just talking “nonsense” again.