BoE lifts forecast amid signs of easing inflation
The central bank’s monetary policy committee (MPC) also voiced frustration that governor Mark Carney’s new policy of “forward guidance” has been misinterpreted as a trigger for interest rate rises.
Minutes of the MPC meeting, published yesterday, showed the Bank expects the economy to grow by 0.7 per cent in the third quarter, up from an estimate of 0.5 per cent in last month’s inflation report.
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Hide AdPolicymakers voted unanimously to keep interest rates on hold at the record low of 0.5 per cent, while the nine-member committee was also united in maintaining the Bank’s quantitative easing (QE) programme at £375 billion. However, the minutes noted: “Were the recovery to falter, the case for further asset purchases would be stronger.”
Under Carney’s policy, rates will not rise until unemployment, which currently stands at 7.7 per cent, falls to 7 per cent – unless there is a risk of inflation running out of control.
Instead of being reassured that rates will remain on hold until 2016, the City expects a hike by the middle of 2015, but the MPC stressed that a fall in the jobless level was not “mechanically linked” to an increase in borrowing costs.
Official figures on Tuesday showed the consumer prices index dipped to 2.7 per cent last month, from 2.8 per cent in July, and the MPC said a stronger pound meant inflation was “marginally less likely than a month ago to be above 2.5 per cent in 18 to 24 months’ time”.