Friday 24 March 2017

Bank of England keeps rates low as it boosts UK growth forecasts

Mark Carney
Mark Carney

Erich Zann

The Bank of England has revised up its growth forecasts for the British economy as it held its main interest rate at a record low of 0.25pc.

Britain's economy has been performing better than many forecasters predicted in the aftermath of last June's vote to leave the EU. In the fourth quarter of 2016, it expanded at a quarterly rate of 0.6pc - making it one of the strongest-performing major economies in the world.

In its quarterly economic projections, also published yesterday, the bank, headed by Mark Carney, increased its growth forecasts for the next three years.

In the Inflation Report, the bank increased its growth forecast for this year to 2pc, 1.6pc in 2018 and 1.7pc in 2019 - up from November's predictions for 1.4pc, 1.5pc and 1.6pc respectively.

The more positive tone contrasts with the worries in the immediate aftermath of the Brexit vote, which had prompted the Monetary Policy Committee to cut rates for the first time in more than seven years in August and expand its stimulus program.

But the minutes to yesterday's meeting suggested that some policymakers may find it hard to justify keeping rates at their present levels despite "exceptional circumstances". "There are limits to the extent that above-target inflation can be tolerated," the minutes said. "The continuing suitability of the current policy stance depends on the trade-off between above-target inflation and slack in the economy."

Rising inflation is expected to continue as the pound's slide hits prices. "These concerns, however, clearly are not severe enough for any member to think higher rates are warranted immediately," said Samuel Tombs of Pantheon Macroeconomics.

Irish Independent

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