The Bank of England’s Monetary Policy Committee has voted by a majority of 6-3 to maintain the Bank Rate at 0.5%. The committee also voted unanimously to maintain the stock of corporate bond purchases and UK government bond purchases.
A key assumption in the MPC’s May projections was that the dip in output growth in the first quarter would prove temporary, with momentum recovering in the second quarter. This judgement appears broadly on track. A number of indicators of household spending and sentiment have bounced back strongly from what appeared to be erratic weakness in Q1, in part related to the adverse weather. Employment growth has remained solid. Although manufacturing output recorded a decline in April, and this was accompanied by a fall in goods exports, surveys of business activity have been stable and, as a whole, point to growth in the second quarter in line with the Committee’s May projections.
The Committee’s best collective judgement remains that, were the economy to develop broadly in line with the May projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon. All members agree that any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.
The next MPC meeting is Wednesday 1 August 2018 with the announcement to be published the following day on 2 August 2018.