Bank of England holds rates in first meeting of the year

The Bank of England has voted 7-2 in favour of holding interest rates at their current level of 0.75 per cent. The Monetary Policy Committee’s decision was based on several factors including an improvement in business sentiment since the general election, a reduction in global trade tensions and better UK survey data of households and companies, which led them to believe that a cut was unnecessary at this time. Having said this, they also downgraded the UK growth forecast, with an estimate for average growth in the UK economy of 1.1 per cent per annum over the next three years. Carney expressed that some modest tightening may be needed over the next few years if the economy continues to perform well, which contrasts to earlier comments where he stated that he expected “limited and gradual” interest rate rises over the coming years. The UK government bond market weakened on the news, while the pound gained strength.