We can confirm that the Monetary Policy Committee has today voted unanimously 9-0 to leave the base rate unchanged at 0.25% and the quantitative easing program at £435bn. They have also raised their forecasts for next years growth rate and inflation rate, with inflation expected to peak at 2.8% in early 2018.
While Mark Carney had previously indicated he would be comfortable to allow inflation to overshoot its target, today the announcement made reference to there being a limit to the tolerance of higher prices. Should the Bank of England wish to offset the inflationary effects of the fall in sterling, then a rise in interest rates would be a useful tool. Some are arguing that it may in fact incentivise those presently cutting spending to offset the fall in their savings returns to spend more too.
It is expected for interest rates to continue to be maintained at 0.25% at future meetings until further political steps towards Brexit are taken. With this morning’s announcement that the government has lost its battle to trigger Article 50 without parliamentary approval, we may see these steps taking longer than has been outlined by Theresa May.