The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target and in a way that helps to sustain growth and employment across the UK. At its most recent meeting held on 1 May in central London, the members of the MPC voted unanimously to maintain the Bank Rate at 0.75%.
The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK Government bond purchases, financed by the issuance of central bank reserves, at £435 billion.
The Committee’s updated projections for activity and inflation are set out in the accompanying May Inflation Report. They assume a smooth adjustment to the average of a range of possible outcomes for the UK’s eventual trading relationship with the European Union. They’re also conditioned on a path for Bank Rate that rises to around 1% by the end of the forecast period.
As with UK financial conditions more generally, that path has been heavily influenced by recent global developments, with forward interest rates in the United States and the Euro area falling markedly.
The MPC has noted previously that UK data could be unusually volatile in the near term due to shifting expectations about Brexit in financial markets and among households and businesses alike. GDP is expected to have grown by 0.5% in Q1 2019, in part reflecting a larger-than-expected boost from companies in the UK and the European Union building stocks ahead of recent Brexit deadlines.
That boost is expected to be temporary, however, and quarterly growth is expected to slow to around 0.2% in Q2.