BoE decision to keep policy unchanged unanimous, meeting minutes reveal

The Bank of England's decision to keep its policy unchanged earlier this month was unanimous, mintues from the central bank's 7-8 May meeting revealed on Wednesday.

Policymakers pointed to inflation remaining below the BoE's 2% target before agreeing that key interest rates should remain at 0.5% and asset purchases at £375bn. The UK entered deflation in April with the consumer price index falling to 0.1%, compared to zero growth in March, the Office for National statistics revealed on Tuesday.

"The appropriate horizon for returning inflation to the target would depend on the trade-off between the speed with which inflation returned to target and the consequences of that speed for output and employment," the BoE minutes stated.

"That trade-off appeared quite similar to how it had looked three months previously: inflation remained below the
target while unemployment was still somewhat above its long-run sustainable rate. The Committee therefore judged it appropriate to set monetary policy to return inflation to the target as quickly as possible after the effects of energy and food price movements had abated."

The BoE also noted that UK gross domestic product (GDP) growth had slowed further in the initial estimate for the first quarter. Shortly after the meeting, Governor Mark Carney presented the Quarterly Inflation Report, saying the BoE had cut its GDP forecast from 2.9% to 2.5% in 2015 and for next year from 2.9% to 2.6%.

"Like the inflation report last week, the minutes of the May MPC meeting published this morning did not challenge significantly current market expectations on interest rates," said Luigi Speranza, analyst at BNP Paribas.