The Monetary Policy Committee (MPC) voted unanimously to maintain the Bank of England Base Rate at the record low of 0.25%, following its momentous decision in August to cut the rate from 0.5%.
It also confirmed it will continue with the programme to purchase £60bn of additional government bonds, extending its asset purchases to £435bn as well as its scheme of buying up corporate bonds totalling £10bn.
Minutes from the meeting held last night stated that business sentiment had recovered from their lows immediately following the EU referendum vote and preliminary GDP growth estimates in Q3 were above expectations.
“These data suggest that the near-term outlook for activity is stronger than expected three months ago,” the report read. “Household spending appears to have grown at a somewhat faster pace than projected in August, and the housing market has been more resilient than expected. By contrast, investment intentions have continued to soften and the commercial property market has been subdued.”
However, it noted that in the period since the beginning of October, sterling’s value has depreciated further but longer-term gilt yields have risen notably, as has the expectation of medium-term inflation.
The CPI measure of inflation is expected to be higher throughout the three-year forecast period than previously anticipated by the Bank. It now expects inflation to rise from its current level of 1% to around 2.75% in 2018, “before falling back gradually over 2019 to reach 2.5% in three years’ time”, with the Bank predicting inflation to return to its normal level of 2% in the following year.
