The Bank of England (BOE) held interest rates steady at 0.25 percent, as expected, on Thursday while implementing some widely anticipated modifications to its growth and inflation assumptions over the three-year forecast horizon.
Meantime, the Bank maintained stock levels of government bonds and corporate bonds at £435 billion and £10 billion, respectively, also as expected.
Governor of the Bank of England, Mark Carney, said the decision reflected the impact that slowing wage growth and rising inflation has had on near-term household spending and gross domestic product (GDP) growth forecasts.
“The Committee judges that consumption growth will be slower in the near-term than previously anticipated, before recovering in the latter part of the forecast as real incomes pick up,” he said in a press briefing following the announcement.
While the BOE was widely seen holding rates steady at 0.25 percent, speculation had centered on whether committee member Kristin Forbes would maintain her dissenting vote for a 25 basis point rise in interest rates as per her stance at the March meeting – and if so, whether she would be joined by one or two more policymakers, most likely seen to be Michael Saunders or Ian McCafferty.
In the end, Forbes remained the sole dissenter with a resulting 7-1 split among policymakers (the committee is currently one member short as Charlotte Hogg’s seat has not been filled since her recent resignation).
Sterling dropped lower on the news with the 7-1 split seen as fairly dovish by the market. The currency slipped to 1.288 against the dollar after trading near 1.292 before the announcement.