-Kristin Forbes, BoE policy maker
The Bank of England opted to keep the interest rate unchanged in March, marking six years since policy makers reduced borrowing costs to all-time low levels to help the UK economy recover from a deep recession. The Monetary Policy Committee maintained the central bank's benchmark rate at 0.5% and agreed to leave the size of the bond portfolio unchanged at 375 billion pounds. While the economic recovery brings prospects of rate hikes closer, annual inflation at 0.3% and the likelihood of an outright decline in prices in coming months put little pressure on central bankers to act. Falling oil prices and the effect of late 2013 and early 2014 Pound's appreciation are the key two downward pressures on consumer prices. Besides, prospect of a very low near-term inflation led the MPC members to unite on rate vote in January after five months of a disagreement at the panel.
Yet the British economy is growing robustly, supported largely by solid consumer spending. Economic output increased 2.6% in 2014 and BoE policy makers expect low inflation to boost household incomes and fuel growth this year. Investors expect the central bank to finally hike interest rates early in 2016. However, some officials have pointed they may favour raising rates even earlier, probably before the year end.
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