Bank of England holds rates as inflation pressures increase

The Bank of England on 24 June decided to keep its monetary policy unchanged, but warned that, as “global price pressures have picked up further,” inflation in the U.K. could “exceed 3% for a temporary period” toward the end of the year on the back of higher energy and commodity prices.

But the UK central bank reiterated, in a release after a meeting of its Monetary Policy Committee, that it is still not ready to tighten monetary policy, as long as spare capacity remains in the UK economy and it hasn’t managed to reach its 2% percent inflation target “sustainably,” meaning over the medium term and beyond the current temporary spike.

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The Bank decided unanimously to keep its key interest rate unchanged at 0.1% and voted by a 8-1 majority to maintain the ceiling of its asset-purchasing program at £895bn – £875bn of government bonds and £20bn of investment-grade corporate bonds.

The central bank noted that the UK economy is now expected to grow at a faster pace than was forecast at its last meeting in May, but expects both growth and inflation to fall back after the current transitory period.

Meanwhile, the Bank also cautioned that it doesn’t rule out that “near-term upward pressure on prices could prove somewhat larger than expected.”

The pound was down 0.3% against the dollar in London midday trading.

This article was published by Dow Jones Newswire

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