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The Monetary Policy Committee voted 8-1 to maintain interest rates unchanged at today's meeting. MPC member Ian McCafferty again voted for a 25bp rate increase. The consensus and forecast estimate was a 8-1 vote on rates. Ahead of today's meeting there was some speculation about whether Martin Weale, who last voted for a hike with McCafferty in December 2014, and Kristin Forbes would consider voting for a hike today. The fact that they didn't suggests that the BoE is in no hurry to hike rates anytime soon. The Committee voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at GBP 375bn.
The central bank presented a more cautious outlook for growth and inflation in the UK than it has in months. The inflation forecast was revised down for both 2016 and 2017. Based on current market interest rate expectations of no rate hike late 2016 the MPC does not see inflation exceeding the 2% target until early 2018, indicating that the bank is not rushing to raise rates.
"Today's BoE data deluge and unexpectedly dovish signals raise the risk of delayed BoE tightening compared to our call for a first rate hike in Q1 2016. The chance of a delay in lift-off in BoE rates until Q2 2016 is now higher", says Nordea Bank.
