The Bank of England (BoE) has, as expected, maintained on Thursday its key rate at 0.25%, a historically low level which it is set since August, but there was a vote for a rise.
The monetary policy committee (CPM) of the British central bank has again said it is willing to tolerate inflation a little higher than the target level of 2% while recalling that there are limits to this tolerance, According to the minutes of its March meeting published Thursday.
But for Kristin Forbes, the data are taken into account in establishing a monetary policy “have evolved to justify an immediate increase in the policy rate.” She cited, in particular, the rapid acceleration of inflation on the one hand and the fact that “the weakness of the activity expected since the referendum (which saw the British vote in June for an exit from the ‘European Union, Ed) did not materialize.’
For her, “there is less reason to tolerate inflation above its target for an extended period, even if monetary policy must remain agile.”
While Ms. Forbes was the only one to vote for a 25-basis-point increase, others of the nine MPC members, whose numbers and names were, as usual, not disclosed. “Noted that relatively little positive news on business prospects or inflation would be needed to make them take into account that a faster reduction in monetary support could be justified,” according to these minutes.
The BoE warned Thursday that inflation should accelerate above 2% in the coming months and peak at around 2.75% in early 2018.
No member had called for a rate hike since Ian McCafferty in January 2016, and the latest split on rates within the CPM dates back to last July when Gertjan Vlieghe called for a decline.
At the same time, the CPM unanimously opted to maintain the total amount of its government bond buyback program at GBP 435 billion (approximately CAD $ 715 billion) and bond repurchases Companies to 10 billion pounds.