- Jane Foley, a foreign-exchange strategist at Rabobank
The Bank of England kept the benchmark interest rate unchanged at all-time low of 0.5% in April. The central bank also left the size of its asset-purchases at 375 billion pounds. Most economists do not predict the BoE to hike interest rates, which have remained unchanged for more than six years, until early 2016. The BoE postponed its interest rate decision from last week to avoid clashing with the general election, which saw Prime Minister David Cameron's Conservative Party victory with an outright majority. It is believed election result is likely to reinforce the BoE's view that there is no need for an immediate lift of interest rates as Cameron's government will continue to tighten fiscal policy with an attempt to eliminate its budget deficit by 2019. The BoE's Quarterly Inflation Report and the second letter from Governor Mark Carney to the Chancellor explaining why inflation is more than 1.0% off its 2% goal will provide a greater insight into the BoE's thinking. In February the central bank predicted it would take up to two years for inflation to return to the targeted level, while growth would continue at an above-average pace of just under 3.0%, as the economy has continued to recover after the financial crisis. Since then, growth in the first three months of this year has come in weaker than the central bank expected at just 0.3%. Economists assume the BoE may have to revised downwards its growth forecasts later this week.
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