BoE hold base rate at 0.1%
The Bank of England’s (BoE) Monetary Policy Committee (MPC) has held interest rates at 0.1%.
The Monetary Policy Committee voted eight to one to keep its Asset Purchase Facility unchanged at £895bn.
Outgoing chief economist Andy Haldane was the sole dissenter on the committee.
Frances Haque, UK chief economist at Santander, said: “The MPC’s decision to leave bank rate unchanged at 0.1% was expected given both the strong economic growth forecasts that have been recorded since the lifting of restrictions into phase three and the fact that the MPC has repeatedly said that they will look through transitory rises in inflation.
“However, April did see an above consensus rise in inflation to 2.1%, which is higher than the Bank of England’s projections for Q2 2021 set out in the May Monetary Policy Report.
“Although this increase in prices may be transitory there continues to be the possibility of an earlier rise in Bank Rate should rises in inflation become permanent.
“Further there is the possibility that the Bank of England will start quantitative tightening earlier than currently expected although this depends on the review they are currently undertaking.”
Alex Maddox, capital markets & digital director at Kensington Mortgages, added: “Everyone is trying to work out if the inflation increase is temporary or here to stay.
“By keeping rates constant, the MPC is suggesting it’s the former. Economic growth is returning at pace as the economy returns to normal, but the risk of restrictions lasting longer due to the delta variant may well have swayed the MPC to hold off for a little longer.”