Sterling headed for 4th successive weekly decline after BoE holds rates

The Bank of England has Voted Base Rate to Stay at 0.5

The Bank of England has Voted Base Rate to Stay at 0.5

This is partly down to the assessment that part of the sluggish growth over the first quarter of this year was partly related to the bad weather when the "Beast from the East" hit slowing down economic activity. Under these assumptions, the Bank's inflation forecasts were downwardly revised a bit, with inflation now seen back to target at the end of two years and holding steady over the remainder of the forecast horizon.

The Inflation Report added inflation had fallen back "more rapidly than expected" at its February meeting, with "pass-through of the past depreciation of sterling to import prices" is "somewhat smaller than previously thought".

The BoE also left the Bank Rate unchanged at 0.5 percent, with only two out of nine rate-setting Monetary Policy Committee (MPC) members voted for a rise, with the two minority-view members being external appointees Ian McCafferty and Michael Saunders, with the BoE's six staff all voting for no rise.

The Bank has described recent disappointing economic data as a "temporary soft patch", implying rates will rise in the fullness of time (with interest rates near an all time low, this is one of the safest of bets and only a question of timing).

The bank made no change in its forward guidance, with the MPC's statement reiterating that it expects Bank Rate to rise.

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That was in line with forecasts from economists polled by Reuters in the past week.

In minutes of the MPC meeting, the Bank said: "Weakness in the data for the first quarter had been consistent with a temporary soft patch, with few implications for the current degree of slack or for the outlook for the United Kingdom economy".

The BoE trimmed its inflation forecasts and cut its growth outlook, but Governor Mark Carney said he expected the economy to recover speed, despite signs of more cautious consumers.

The Bank of England will make its interest rate decision in August without seeing the official second quarter GDP figures, which could have a critical bearing on the vote.

The preliminary estimate of the U.K.'s GDP growth in the first quarter was 0.1 percent, 0.3 percentage points lower than expected in February, the bank said.

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