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BoE holds base rate at 0.1 per cent

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  • 24/06/2021
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BoE holds base rate at 0.1 per cent
The Bank of England’s Monetary Policy Committee (MPC) has uninanimously voted to maintain the base rate at 0.1 per cent.

 

This is despite inflation rising above the committee’s two per cent target. In May, CPI inflation increased from 1.5 per cent to 2.1 per cent. 

Inflation is forecast to rise temporarily above target to three per cent due to increases in energy prices. However, in the medium term, inflation is expected to return to around two per cent. 

The MPC predicted UK GDP to recover to pre-pandemic levels this year largely due to the return of consumer-facing services and the easing of restrictions. 

June’s output is expected to be 2.5 per cent below pre-pandemic levels but this was a 1.5 per cent down-revision from the MPC’s prediction last month. 

Alex Maddox, capital markets and digital director at Kensington Mortgages, said: “Everyone is trying to work out if the inflation increase is temporary or here to stay.  

“By keeping rates constant, the MPC is suggesting it’s the former. Economic growth is returning at pace as the economy returns to normal, but the risk of restrictions lasting longer due to the delta variant may well have swayed the MPC to hold off for a little longer.” 

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