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June 15, 2017MONETARY POLICY: UK The Bank of England's Monetary Policy Committee (MPC) voted to maintain the Bank Rate at 0.25 per cent and continue with UK non-financial corporate bonds purchases of up to £10 billion and to maintain the stock of UK government bond purchases at £435 billion. The MPC notes that "monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years". The MPC is balancing the speed at which to return inflation to target and support that monetary policy provides to jobs and economic activity through most of the forecast period.
The MPC noted that GDP growth slowed in the first quarter due to weaker household spending and there have been signs of slowing in the housing market and new vehicle purchases. Consumer confidence remains resilient and employment continues to grow. Exports indicators are positive, reflecting depreciation of sterling and global demand. Investment intention surveys suggest that activity to be above historical averages.
CPI inflation in the United Kingdom was 2. 9 per cent in May, above expectations and the 2% target as previous sterling depreciation feed into consumer prices. Inflation is likely to be above 3 per cent by autumn and remain above the 2% target for an extended period. Pay growth has moderated from already subdued rates even as the unemployment rate, at 4.6 per cent, is at a 40-year low.
Bank of England
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