BoE to wait out soft data as it eyes next rate rise

With the United Kingdom inflation decelerating toward the target more quickly than expected in February and the GDP growth slowing down sharply at the beginning of this year, it was no surprise from the Bank of England to keep the Bank rate at the unchanged level of 0.50 percent in May.

"It's likely over the course of the next year rates will go up. that's the most likely thing to happen", Mr Carney said in an interview with the BBC, the broadcaster said.

Meanwhile, while the US Dollar (USD) initially rose against the Pound (GBP) in the wake of the BoE's policy meeting, the USD exchange rate was forced to relinquish these gains following the release of the latest US inflation figures.

Across April it was revealed that United Kingdom wages rose 2.8 percent, unemployment dropped to its lowest for 43 years, manufacturing orders hit their highest since 1988, exports rose a massive 10.4 percent, and Sterling hit a post-Brexit high of $1.4377 - up six percent on the year.

"This is not an economy that is growing at robust rates", but growth in demand was still likely to outstrip growth in supply over the Bank's rate horizon. This fall in inflation was larger than predicted, further strengthening the case against the Bank of England upping rates in May. Previously the cost of borrowing had been decided between the chancellor and the governor of the Bank.

He argued that the "underlying pace of growth remains more resilient than the headline data suggest", though the bank still had to revise down its forecast for this year's growth to 1.4 percent from 1.8 percent. However, at the same meeting during which the Bank's MPC voted to hold interest rates steady, they also downgraded their forecast for the year's economic growth from 1.8% to 1.4%. These projections are conditioned on a gently rising path for Bank Rate over the next three years.

The committee meets monthly to discuss whether to cut, raise or leave interest rates unchanged, as well as other measures such as quantitative easing. The financial markets are expecting three quarter-point increases over the next three years.

Even so, the seven members of the MPC who voted for no change said they wanted confirmation that the economy had merely been going through a soft patch before voting for higher rates. The Consumer Prices Index in March fell to 2.3 per cent, down from 2.7 per cent in February.

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