BoE votes unanimously to keep interest rates unchanged

The Bank of England on Thursday decided to keep its policy measures unchanged as it raised its economic forecasts in the latest Quarterly Inflation Report.

The Bank decided to maintain interest rates at 0.25%, the asset purchase programme at £435bn and corporate bond purchases at up to £10bn. The move was widely expected by economists.

The minutes of the policy meeting, released alongside the announcement, showed policymakers voted 9-0 in favour of the decision.

In the BoE’s Quarterly Inflation Report, the central bank upgraded its estimates for the economy for the second time since the Brexit vote last June.

The Monetary Policy Committee now predicts gross domestic product rising 2.0% this year, compared to 1.4% at its November inflation report when it also raised forecasts.

The MPC also raised predictions for growth in 2018 and 2019 to 1.6% and 1.7% respectively, from 1.5% and 1.6% in November.

However, the forecasts indicate a slowdown in coming years as the UK begins the formal process of exiting the EU.

GDP rose 2.0% in 2016, according to official data last week, down from 2.2% in 2015 and 3.1% in 2014.

Meanwhile, a weaker pound is expected to push inflation higher this year. The Bank anticipates inflation will average 2.7% this year, nudged down slightly from November's projection of 2.8%, while it still expects inflation to rise 2.6% in 2018. It sees inflation slipping back to 2.4% in 2019. The Office for National Statistics revealed in January that inflation rose 1.6% in the year to December 2016.

"Over the next few years, a consequence of weaker sterling is that the higher imported costs resulting from it will boost consumer prices and cause inflation to overshoot the 2% target," the Bank said in a statement. "This effect is already becoming evident in the data."

The BoE reiterated that there is a limit to the extent it will tolerate inflation rising above its 2% target. The policy stance will depend on the trade off between above-target inflation and slack in the economy, it said.

BoE Governor Mark Carney was due to speak on the inflation report at a press conference at 1230 GMT.

Capital Economics said the first BoE 'Super Thursday' saw the MPC minutes and inflation report strike a "cautiously-optimistic tone".

"Nonetheless, the minutes suggested that some MPC members had moved a little closer to the limits of their tolerance of above-target inflation, indicating that it may not be long before we see one or two votes for rate rises," said Paul Hollingsworth, UK economist at Capital Economics.