- Bank of England
The Bank of England revised its economic growth forecasts due to a gloomier global outlook. Moreover, the lone policy maker who had voted for a rate hike in recent months unexpectedly changed his mind. The BoE's Monetary Policy Committee had voted 9-0 to keep rates on hold at a record-low 0.5%, where they have stayed for almost seven years. The central bank said sharp plunge in oil prices and equities, and significant risks in emerging economies, weighed on the global outlook, though sturdy domestic demand should ensure the UK growth still remained near its long-run average. The BoE forecast the UK's economy would grow 2.2% this year and 2.3% in 2017, down from f2.5% and 2.6% in predicted in November and barely changed from 2015, when growth disappointed expectations. On top of that, the February Inflation Report lowered the short-term inflation outlook, with CPI at around 0.82% and 1.91% by the end of 2016 and 2017 respectively. The BoE expects inflation to exceed the 2% goal during the first quarter of 2018 for the first time.
Discussing monetary policy tools the central bank has at its disposal, the BoE Governor Mark Carney said that interest rates were not at the lower bound, meaning they could be cut further. However, Carney highlighted that policy makers did not consider negative rates, as monetary policy was pointing in a different direction. Currently the market participants are pricing the first interest rate increase at the turn of 2017-2018.
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