Investing.com - The Bank of England made no changes to monetary policy at the outcome of its meeting on Thursday and predicted that inflation will be higher than expected three months ago.
The Monetary Policy Committee voted 7-1 to keep rates on hold at a record low of 0.25%, in line with economists’ expectations.
Kristin Forbes, who is due to leave the BoE in June, cast the sole vote in favor of raising borrowing costs to 0.5%. The other seven members of the MPC opted to keep rates at 0.25%.
The committee voted unanimously to make no changes to its bond-buying stimulus program, in line with economists’ expectations.
The MPC was one member short, with Charlotte Hogg still to be replaced after resigning last month following her failure to disclose that her brother works for Barclays, which is regulated by the BoE.
The bank trimmed its forecast for growth for this year, saying it now expected economic growth of 1.9%, down from 2.0% three months ago. It raised its growth forecast for 2018 to 1.7% up from 1.6% in February.
The bank now expects inflation to be 2.7% this quarter, up from the 2.4% rate it forecast in February. It said inflation would continue to rise further above its 2% target in the coming months, “peaking a little below 3% in the fourth quarter."
The bank warned that living standards will fall this year as the headwinds from Brexit mount.
The bank cut its forecast for average earnings growth for this year to 2% from 3% expected in February.
The BoE also warned that it might have to raise interest rates faster than the market thinks.
"If the economy follows a path broadly consistent with the May central projection, then monetary policy could need to be tightened by a somewhat greater extent over the forecast period than the very gently rising path implied by the market yield curve underlying the May projections," the minutes said.
GBP/USD was trading at 1.2886 from around 1.2919 ahead of the announcement, while EUR/GBP was at 0.8334 from 0.8415 earlier.