The Bank of England's Monetary Policy Committee (MPC) voted to maintain the Bank Rate at 0.5% and to maintain the UK non-financial corporate bonds stock of £10 billion and the stock of UK government bond purchases at £435 billion. The MPC notes that the prospect of excess demand over the forecast period has reduced the degree in which it is appropriate to accommodate an extended period of inflation above target and that if the economy develops as expected it will be appropriate to tighten monetary policy so that inflation returns to its target at a conventional horizon.

The Bank of England expects GDP to grow by around 1.75 per cent per year on average through 2020. Growth continues to move towards net trade and business investment and away from consumption. Business investment is still restrained by Brexit-related uncertainties but is supported by strong global demand for exports and accommodative financial conditions. Household consumption is expected to remain subdued with only modest growth in real income.  The MPC views that the UK economy currently has a very limited degree of slack.

CPI inflation fell to 2.5 per cent in March and the inflation rate for import-intensive goods and services appear to have peaked. The impact of past depreciation of sterling on inflation, while currently significant, will fade over time. CPI inflation is projected to fall back to target in two years assuming that the Bank Rate gently rises over the forecast horizon.

Bank of England