Base rate held as BoE predicts stronger economic recovery

Base rate held as BoE predicts stronger economic recovery

 

This was up from five per cent growth forecast in February. 

The Bank attributed its revised prediction to the UK’s vaccination program, which it said, “was helping the UK economy to recover rapidly”. 

The MPC said low interest rates supported households and businesses by keeping the cost of borrowing cheap. As a result, the committee expects the ongoing low rate to help in meeting its two per cent inflation target this year. 

It predicted the base rate would be held at 0.1 per cent until Q2 2023, when it would rise to 0.3 per cent. By Q2 2024, the base rate is expected to be 0.6 per cent.

The Bank maintained quantitative easing at £895bn. 

With employees expected to return to work once the Coronavirus Job Retention Scheme ends in September, the Bank said, along with an improvement in the economy, it had reduced its projection for near-term unemployment to 5.4 per cent. 

 

Boost of confidence

Frances Haque, Santander UK chief economist, said: “The MPC’s decision to leave Bank Rate unchanged at 0.1 per cent was expected given the path for lifting restrictions continues on track, along with a fall in infection rates supported by the swift rollout of the Covid-19 vaccination programme 

“Both will help boost confidence and support growth in the UK economy which is reflected in the updated forecasts in the Monetary Policy Report published today.”   

She added: “However, risks to the forecast remain both from the emergence of different virus variants as well as the possibility of increasing inflation.  

“On that basis the Bank remains committed to intervening should the financial markets and the UK economy need additional support measures as we move through the rest of the year.”