The Bank of England has put the interest rates on hold due to what it terms as a soft patch faced by the economy for a temporary period. The marginal growth of the economy by 0.1% for the quarter led the Bank governor, Mr. Carney and six other members of the Monetary Policy Committee to take this decision. Two members had voted for an increase.
Chief economist, Brian Coulton clarified that this indicated a postponement of interest rate hike and not a cancellation. The interest rates would in all likelihood rise by 2018 end with the second rise predicted for 2019 and 2020 would witness a third one. The Bank attributed the economic slowdown to bad weather striking the country in March and indicated that the fundamental base of growth was quite strong.
However, a contrary view was held by ex MPC member, Andrew Sentence who said that the reasons for the slowdown of the economy were not understood well.
The National Statistics Office released figures which underlined a still gloomier view for the economy. According to its opinion the sluggishness in the economy could not be attributed to the bad weather, it was instead due to basic issues underlying the economy.
Mr. Carney gave an indication that interest rate hike could be expected during the following year period. He disclosed that the hike would not be steep and cautioned that the UK economy could alongside also face the brunt of Brexit or protectionist policies with regard to trade and if this led to an economic slowdown then they would need to revise their policy.
A determining factor for the interest rate would be whether the figure of inflation would adhere to Bank’s estimates. For March, the inflation figure stood at 2.5% per anum, higher than the 2% estimate of the Bank. The Bank feels that the higher inflation rate is because of greater price paid for imported items led by a feeble pound. However, this effect, it feels will recede in the following years leading to 2% inflation rate by beginning 2021.
Will the economic slowdown reverse or persist? Time will tell!
Before turning out to be a full-time writer and editor, James Tidwell was a blogger who wrote his outlooks and viewpoints relating to Entertainment and Sports. Owing to his interest and absolute fineness of playing with world beautifully, he was appointed to dabble in Entertainment and Sports world.