Bank holds policy again ahead of inflation report this month

THE BANK of England’s policymakers voted to hold interest rates at 0.5 per cent for another month yesterday, with next week’s inflation report more likely to offer signals of the future direction of policy.

If the Bank plans to make any updates to its modified forward guidance policy, the report is likely to contain them, along with fresh forecasts for growth and inflation.

The Bank will also comment on how much spare capacity, or slack, there is left in the recovering British economy.

“The evolution of slack is key to gauging when the first rate hike will come, particularly given that the inflation outlook is benign, with the pound continuing to climb and few pressures coming along the supply chain,” said John Bulford of Oxford Economics.

Some organisations have recently hiked their forecasts for economic growth, following a spate of positive business surveys which indicated that the expansion has not started to let up yet, suggesting that the first post-crisis hike may come sooner than expected.