Bank of England leaves rates on hold

Mark Carney

Is Mr Carney revealing once again his "unreliable boyfriend" tendencies, promising that interest rate rises are just around the corner, only to pull back?

Carney defended himself against that charge, arguing that when the situation changes, the bank's policy response has to change. We expect the recent weakness in the data to largely prove temporary and a Brexit deal to be sketched out by October.

"In terms of speeches. perhaps governors need to be a bit more careful than other members of the committees about expressing views because markets will jump on anything they say as being more definitive than it is".

Last November, the bank raised its main interest rate for the first time in a decade, taking back the rate cut it enacted in August 2016, in the immediate aftermath of Britain's surprise vote to leave the European Union.

The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.3536.

The pound has slipped after the Bank of England held interest rates and investors priced in a lower likelihood that there would be an increase any time soon.

"These projections are conditioned on a gently rising path for bank rate over the next three years".

The BOE isn't the only central bank to wobble on the exit ramp from the easy money of the past decade, even as the US Federal Reserve sticks to its plan to gradually raise rates.

The slowdown in the first three months of the year was one of two reasons why the Bank stayed pat. The Bank of England adjusts the base rate in accordance with the general economic climate in order to either encourage saving or spending with the general aim of maintaining a prosperous and stable economy.

The Bank of England has announced it is keeping its main interest rate at 0.5% amid evidence that the economy is slowing.

The Royal Institution for Chartered Surveyors said that April saw a slight decline in average prices across the United Kingdom, but but quite big falls in values in London - particularly among homes in the £500k to £1million bracket.

"If the forecasts are right then expect interest rates to remain lower for longer as United Kingdom growth lags the rest of the world, inflation subsides and Brexit clouds remain".

The minutes from the meeting show the MPC wants to wait and see how the economy performs over the coming months.

The inflation forecasts also show that any lost economic output in the first quarter would not be recovered throughout the remainder of the year, despite expectations for the second quarter to be "commensurately stronger". "Despite the predicted drop in inflation, this announcement is likely to receive a less than warm reception from high-street savers, who are seeing the value of their hard-earned money decreasing each day through inflation - and of course, many banks will not pass all or any of this rise on to savers".

However, as with everything related to the British economy, much depends on the Brexit discussions.

With the issue of the UK's future relationship with the EU customs union still up in the air this decline in trade does not appear to bode well for the domestic outlook.

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