Investment - Articles - BoE has missed another opportunity to raise rates

Bank of England keeps rates unchanged

Before the decision, sterling was up as much as 0.4% at $1.3618.

"Rate-setters have kicked the interest rate can down the road once more", Tom Stevenson, investment director for Personal Investing at Fidelity International said.

Note from the bottom line on the chart above that the pair is still in "oversold" territory - although less so than it was earlier this month, suggesting that a rally is the more likely option.

Despite the large downgrade to Q2 growth forecasts, the Bank did not change it's Q2 2019 and 2020 forecasts, however, which remained at 1.7% (see table below). For now, most policymakers wanted to wait to be sure that the weakness passes quickly.

Significantly, the central bank dismissed most of the slowdown in the first quarter GDP growth as being temporary and continued to envisage a rebound in the second quarter GDP growth.

He commented: "The manufacturing sector is still growing, and interest rate rises are needed to get back to normal monetary conditions - inflation of 2.5% does not change this".

The committee voted seven to two to retain the BoE's benchmark rate at 0.5 percent.

The Bank of England will today announce whether it will raise interest rates, with most experts expecting it to hold off until at least after the summer. But very weak UK GDP growth figures and fast-retreating inflation has seen a rapid reversal of the Old Lady's increasingly unhelpful forward guidance.

But slowing consumer lending and a sluggish housing market created greater-than-usual uncertainty about consumer demand, the BoE said. The bank's forecasts are based on an assumption that there will be a smooth transition to the new trading relationship.

And while Brexit-fuelled inflation has fallen sharper than expected in recent months, the Bank said rate hikes would still be needed over the next three years, with cost pressures building in the economy. He therefore extensively emphasised the low level of slack in the United Kingdom economy - as illustrated by the more than 40-year low in unemployment and the pick-up in average weekly earnings - and played down the importance of the soft patch in the Q1 data.

While this had been expected by the vast majority of economists polled by Reuters, financial markets picked up on a slightly cautious tone from the BoE that pushed sterling near to four-month lows against the dollar.

In individual stock news, ITV's share price has added 4.30 percent to 157.70p after the blue-chip broadcaster revealed a five-percent rise in total external revenue in the first quarter.

One of Gordon Brown's first moves as chancellor in 1997 was to hand control of interest rates to an independent Bank of England. What do you think the BOE will do?

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