The Bank of England is expected to leave interest rates untouched as it unveils its latest predictions of the prospects for inflation and growth in the UK economy.
The MPC’s latest monetary policy decision will be announced at midday before governor Mark Carney faces questions on the Bank’s policy and newly published growth forecasts, unveiled at the same time.
Pressure has been slowly growing in recent months for the Bank’s rate-setting MPC to adopt tighter monetary policy by raising interest rates, with external member Kristin Forbes voting at the last meeting for a 0.25 per cent hike in bank rate.
Bank rate, the interest rate charged on borrowing by the UK’s banks, currently stands at 0.25 per cent after the MPC responded to the Brexit vote with a cut last August from 0.5 per cent.
The committee, which will be short of a member after the departure of former deputy governor Charlotte Hogg, voted eight to one to maintain monetary policy unchanged at its last meeting in March. Forbes, who leaves the Bank to return to academia in June, is generally seen as a more hawkish outlier on the MPC.
Recent economic data, as well as the uncertainty around the snap General Election called for 8 June, may lessen some of the demand for tighter policy from the Bank.
Growth in the UK economy slowed more than expected in the first quarter to hit 0.3 per cent, its weakest pace in a year.
Meanwhile the recent rise in the value of the pound back towards $1.30 against the US dollar, a level not seen since September, will also likely add to previous analysis by the Bank saying the rise in inflation above its two per cent target will be temporary.
The consumer price index of inflation rose by 2.3 per cent in March, with the Bank previously forecasting it will peak at around 2.8 per cent around the end of the year.
Victoria Clarke, an economist at Investec, said: “We expect that the ‘some members’ who were shifting towards tighter policy in March will be feeling more comfortable with the current policy stance this time around.”
Meanwhile the Bank will likely maintain the stock of its quantitative easing bond purchases at £435bn in UK government bonds and £10bn in corporate bonds.
Howard Archer, chief UK and Eurozone economist at IHS Markit, said: “Markedly slower-than-expected UK GDP growth in the first quarter, the snap general election on 8 June, muted earnings growth and early difficult posturing ahead of the start of the Brexit negotiations between the UK and the EU make a pretty compelling argument for the Bank of England to sit tight on Thursday.”