Neil DennisThe Bank of England kept the UK's base rate of interest at 0.25% today, focusing less on rising inflation and rather reflecting its commitment to help sustain growth in the face of a slowing UK economy.
The Bank's monetary policy committee – normally nine, but this month missing a member – voted 7-1 in favour of keeping the base rate at 0.25%. Kristin Forbes was the single member to vote for a quarter-point rise to 0.5%.
Inflation above target
Although the rate of consumer price inflation (CPI) – currently at 2.3% – has remained above its target of 2% since February, the central bank said the overshoot "entirely reflects the effects of the fall in sterling since late 2015 on import prices".
Weak wage growth was also expected to help keep a lid on inflation, which the Bank forecast to peak in the fourth quarter of this year at 2.8 per cent, then ease back to 2% over the next three years.
Brexit negotiations: BoE cautious on growth as Britain exits European Union - source: Public Domain PicturesGrowth forecasts cut
Forecasts for economic growth were cut slightly, however, underlining the levels of uncertainty surrounding the UK's exit negotiations from the European Union.
Data published a couple of hours before the interest rate announcement added further evidence of slowing GDP growth – which eased to 0.3% in the first quarter (Q1), from 0.6% in Q4 2016. Industrial production rose at 1.4% in March, down from the previous month's 2.5%.
Pound falls
Adam Chester, head of economics at Lloyds Bank Commercial Banking said the BoE announcement was more hawkish than expected.
"While one member voted a quarter-point rise, some other members suggested it would not take much more positive news to prompt them to change their minds," he said.
The pound, however, did not reflect any hawkish sentiment, falling 0.6% against the dollar to $1.2861 and down 0.5% to €1.1845 against the euro.
The FTSE 100 reversed earlier gains and fell 0.1% to 7,380.52.