The MPC voted to hold its benchmark rate at 0.5% per annum on 10 May 2018. The vote was 7-2 with Michael Saunders and Ian McCafferty backing a 0.25% per annum hike. There was a unanimous decision to keep the asset purchase target at 435 billion pounds and to leave plans to buy as much as 10 billion pounds of corporate bonds unchanged.
Turning to the latest Quarterly Inflation Report that was published at the same time as the rate announcement:
The big judgment the MPC needed to make on its GDP growth forecast was whether the weakness in Quarter 1 would be temporary or whether it would persist. The forecast appears to reflect a cautious view. The MPC expects the figure to be revised upward somewhat to 0.3%. That means less catch up is needed in subsequent quarters. It forecasts growth at 0.4% in Quarter 2 and the rest of the year. The mechanical effect of weaker growth in Quarter 1 was enough to see the 2018 growth forecast lowered to 1.4% per annum from 1.8% per annum previously. The forecasts for 2019 and 2020 were both left unchanged at 1.7% per annum.
The question for the MPC on inflation was whether the recent weakness in the data was enough to adjust the extent to which the decline in sterling was likely to support its forecasts over the coming three years. The MPC responded by lowering its inflation profile across the forecast period. It now expects inflation to come in at 2.2% per annum in Quarter 4 2018 (2.4% per annum previously), 2.1% per annum in Quarter 4 2019 (2.2% per annum previously) and 2.0% per annum in Quarter 4 2020 (2.1% per annum previously). The downgrade entirely reflects a weaker contribution from import prices rather than any change to the pace at which the committee expects domestic cost pressures to build.
Market forecast is for three rate hikes in the next three years with the first hike in November 2018 although a small minority still favour an earlier hike (in August to correspond with the next publication of the Quarterly Inflation Report).
The next MPC meeting is Wednesday 20 June 2018 with the announcement to be published the following day on 21 June 2018.