BoE Remains With Keeping Interest Rates, But Latest 'Hint' Calls for Attention!

<p>The Bank of England kept interest rates unchanged on Thursday, after policymakers issued differing views on the right move for policy, and Governor Andrew Bailey wanted more evidence that inflation would return permanently to target before making a move.</p><p><br /></p><p>Six of the nine members of the Monetary Policy Committee agreed to keep rates at a 15-year high of 5.25%. Jonathan Haskel and Catherine Mann chose to raise by 0.25 percent, while Swati Dhingra chose to decrease by the same amount.</p><p><br /></p><p>This is the first time since August 2008 at the start of the global financial crisis that policymakers have chosen to raise and lower interest rates at the same meeting.</p><p><br /></p><p>"We need to see more evidence that inflation will fall fully to the 2% target, and stay, before we can cut interest rates," BoE Governor Andrew Bailey said.</p><p><br /></p><p>Economists interviewed by Reuters had expected one policymaker to choose to raise rates, and the other to choose to keep rates.</p><p><br /></p><p><br /></p><p>In softening the language on the interest rate outlook, the BoE issued a warning that "further tightening" would be required if more sustained inflationary pressures emerged. On the other hand, the BoE stated that it will "re-examine how long the Bank Rate should be kept at the current level".</p><p><br /></p><p>Earlier this morning, The Fed stated that their rates have reached a peak and will decrease by the end of the year.</p><p><br /></p><p>The BoE reiterated that policy should remain "for a sufficiently long period" even as the BoE lowered its inflation expectations for the coming months. However, higher wage growth has set Britain apart from its peers in driving inflationary pressures over the longer term, the BoE said.</p><p><br /></p><p>Annual consumer inflation is now likely to return to 2% in the second quarter of this year, albeit momentarily. But medium-term expectations based on much lower market interest rates than in November suggest inflation will rise back above 2% in the third quarter of 2024 and not return to target until the end of 2026, a year later than the BoE forecast in November.</p><p><br /></p><p>The BoE remained in its view that Britain's economy would struggle to produce substantial economic growth in the next quarter, despite a small increase in annual growth projections. As a small boon for finance minister Jeremy Hunt, the BoE reckons that the tax cuts announced in November will boost Britain's economic growth slightly in the coming years.</p>