Bank of England keeps rates at record low as economy slows
- Author: Adam Floyd May 11, 2017,
May 11, 2017, 23:22
It said it then sees a sharp pick-up in hitherto lacklustre wage growth as unemployment fell to its lowest in a generation.
Carney said the BoE had not tried to forecast what would happen if there was a "disorderly Brexit" where Britain crashes out of the European Union without an agreement on future trade relations.
'We expect consumer spending to remain weak throughout this year and next as rising inflation erodes the purchasing power of households'.
"This is going to be a more challenging time for British households over course of this year", warned Carney, during a news conference (https://twitter.com/bankofengland/status/862626645647253507). It also warned that domestic price pressures could be building at that time.
"Secondly, the inflation is above target because the exchange rate went down 16 percent, why did the exchange rate go down 16 percent?"
Growth slowed sharply to 0.3% in the first three months of the year from 0.7% in the previous three months.
The Bank of England is expected to forecast steady economic growth for the year ahead, with GDP improving from a slow-moving start to the year.
"The business community wants to see how each political party plans to best support stability and offer a long-term vision for the United Kingdom economy, making it the most inclusive, innovative and open in the world".
But the RBI is determined to chase the 4 percent figure, the officials said, as Patel and the other five members of his monetary policy committee (MPC) seek to defend the RBI's credibility on inflation. But after business surveys last week signalled the economy may have enjoyed a rebound in April, there was a risk that further positive news on growth and higher-than-expected inflation could prompt an earlier rate rise, Buckley added.More news: Fired Fox radio reporter sues, claiming retaliation
Ben Brettell, senior economist at Hargreaves Lansdown, said: "The Bank warned that rates may have to rise sooner and faster than the market now expects".
Although the BoE said it might need to raise rates before the late 2019 date market pricing indicated, that was nine months later than its February forecasts showed.
But these market assumptions were based on average prices in the two weeks to May 3.
Earlier the BOE held interest rates at a record low of 0.25% and left its QE programmes unchanged, while also trimming growth forecasts marginally, dropping its 2017 forecast from 2% at February's Inflation Report to 1.9% in May.
Kristin Forbes was the sole policy maker to vote for a rate hike in March. The election itself will have little bearing on the BoE's new forecasts and Carney is likely to remind investors and the British public that the next move in rates is likely to be up.
The central bank trimmed its forecast of growth this year to 1.9 percent from 2.0 percent, but nudged up its forecasts for 2018 and 2019 to 1.7 percent and 1.8 percent.
Figures from the end of March revealed that real household disposable income, after adjusting for inflation, shrank by 0.4 percent as compared to the previous quarter, the steepest drop in almost three years.
Latest forecasts from the National Institute of Economic and Social Research predict inflation will peak at 3.4% in the final quarter of 2017, although it said the Bank would "look through" this and likely keep rates on hold for another two years.
"In the MPC's latest projections there is such a trade-off through most of the forecast period, with a degree of spare capacity and inflation remaining above the 2% target".