Bank of England officials not talking of reversing QE - Carney

Mark Carney

The Bank could trim inflation forecasts further but keep a projection that it would be slightly above the 2% target in three years' time, thereby still necessitating first steps in a plan to reach that target-still some 50 basis points below the most recent rate- over the "more conventional horizon" Carney envisaged in February.

The Bank of England's Monetary Policy Committee have voted 7-2 to maintain Bank Rate at 0.5%, the same ratio as in its last meeting.

Just a month ago a rate hike from 0.5% to 0.75% seemed a near certainty, but poor United Kingdom economic data in recent weeks, as well as a dovish speech from Governor Mark Carney, dampened expectations for any movement in policy.

New Zealand central bank Governor Adrian Orr said in an interview on Thursday that the bank wants to see wages rise and start to drive up prices before it increases interest rates from a record low.

Instead, figures showed the economy barely grew in the first three months of the year and inflation fell by more than anticipated.

New forecasts from the central bank showed inflation will slow more sharply, falling to the 2% target in two years - but it said this is partly because the pass-through of the pound's depreciation since the Brexit vote is happening faster.

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Only a few weeks ago, economists were predicting a hike in borrowing costs to 0.75 percent this month but recent gloomy data changed the outlook.

The reputation of the Bank of England's May policy decision has very much preceded the event itself.

The Pound to Euro (GBP/EUR) exchange rate is likely to see some sharp moves in the wake of the BoE meeting today, as investors assess the future course of monetary policy. "With rates still rooted at emergency levels, this is one of the challenges faced by the Bank and how it chooses to deal with this will be key to the success of the United Kingdom economy in coming years".

The pound has slipped after the Bank of England held interest rates and investors priced in a lower likelihood that there would be an increase any time soon.

"The governor stated that the main reason they did not raise rates today was because of the soft data in the first quarter of the year".

But the Bank's quarterly forecasts revealed there was some doubt around the underlying economic picture in the United Kingdom, clouded by the recent weather impact, with the Bank noting "greater-than-usual uncertainty" over consumer spending. In the year to March, annual consumer price inflation was 2.5 percent, well below the bank's projection of nearly 3 percent.

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