The Bank of England (BoE) has announced an unchanged interest rate at 0.1 per cent, despite prediction of inflation being temporarily above its 2 per cent target in the months ahead.
In a report issued by the BoE on Thursday, it’s Monetary Policy Committee (MPC) voted unanimously to maintain bank rate at 0.1 per cent at its meeting ending on Tuesday, reports Xinhua news agency.
The committee voted by a majority of eight to one to continue with its existing program of the government bond purchases, maintaining the target for the stock of these government bond purchases at 875 billion pounds and so the total target stock of asset purchases at 895 billion pounds, said the report.
The bank said that the UK’s gross domestic product (GDP) was expected to recover strongly over 2021 to pre-pandemic levels, adding that “output in a number of sectors is now around pre-Covid levels, although it remains materially below in others.”
In addition, the bank said the consumer price index (CPI) inflation was projected to rise “temporarily above the 2 per cent target”, being likely to exceed 3 per cent for a temporary period, mainly due to developments in energy and other commodity prices, said the report.
“As these transitory effects faded, conditioned on the market path for interest rates, inflation was expected to return to around 2 per cent in the medium term,” said the bank.
Noting that near-term upward pressure on prices is likely larger than expected, the bank said taking together the evidence from financial market measures and surveys of households, businesses and professional forecasters, the committee judged the inflation expectations “remain well anchored”.
According to figures released by the British Office for National Statistics (ONS) earlier this month, the UK’s 12-month inflation rate jumped to 2.1 per cent in May 2021, above the central bank’s 2 per cent target for the first time since July 2019.