BoE left interest rates unchanged, cuts growth and inflation forecasts

Thursday, Feb 04 2016

Bank of England policy maker Ian McCafferty dropped his call for an interest-rate increase as officials cut their growth and inflation forecasts and signaled borrowing costs will stay low. The Monetary Policy Committee led by Governor Mark Carney left the benchmark at a record-low 0.5 percent, as the nine-member panel voted unanimously for the first time since July last year. While the rate outcome was forecast by all economists in a Bloomberg survey, just three out of 25 predicted the vote switch.

The February decision was published in London alongside new economic projections showing inflation will remain below 1 percent until the end of the year. “The MPC judges the risks to the central projection to be skewed a little to the downside in the near term, reflecting the possibility of greater persistence of low inflation,” the committee said on Thursday. “Low realized inflation will continue to moderate the increase in wage pressure in the near term.”

The bleaker outlook reflects policy makers’ concerns about the international picture, with officials saying emerging-markets are likely to grow “more slowly than in recent years” and risks to the world economy “lie to the downside.” Officials made their judgments against a backdrop of a renewed slide in oil, a rout in global equities and commodities, volatility stemming from China’s slowdown and uncertainty about Britain’s upcoming vote on its European Union membership.

Sterling is currently being traded around 1.4530 handle. Pair is likely to find support around 1.44 handle and resistance above 1.46 level. Later today, in the US session, Unemployment Claims figures are scheduled for a release.

Source: Bloomberg.com

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