Bank of England keeps policy unchanged

Following its meeting today the Monetary Policy Committee kept its policy settings unchanged.

Bank Rate was maintained at 0.5% and the size of its asset purchase facility at £375bn.

The decision followed the previous day’s Budget which featured a new national living wage, which came as a surprise to business.

“The "living wage" and cuts to tax credits may well – given the tight labour market -- lift pay growth, especially at the bottom end of the pay scale. This prospect probably makes it more likely that the MPC will hike rates in the next few quarters, unless external factors (eg Greece) threaten to derail the UK recovery”, analysts at Citi explained to clients in a research note.

“No statement was made but, with inflation at just 0.1%, the Bank’s inflation target of 2.0% is clearly still a long way off and, with ‘Grexit’ concerns casting a dark cloud of instability over the economic outlook, now is clearly not the time for central banks to be causing further uncertainty”, Chris Williamson, chief economist at Markit said.