“The Bank of England voted 7–2 in favour of keeping interest rates on hold, with favourable domestic and global developments since the previous meeting key factors behind the decision. The near-term risks to the inflation outlook have eased, reducing the immediate need to tighten policy.
“The data flow in the run up to today’s meeting strengthened the case of more dovish MPC members, who favoured a wait-and-see approach over pre-emptively hiking interest rates. Both headline and underlying measures of inflation came in weaker than the Bank’s April forecasts, while the labour market also continued to soften, with wage growth showing no signs of rebounding despite the recent energy spike.
“MPC members maintained a balanced tone in the minutes, however they are unlikely to follow through with an interest rate hike. There has been little evidence of a renewed build-up in domestic price pressures, while the recent fall in energy prices, if sustained, is set to bring some disinflationary bias into the pipeline. Taken together, the MPC is likely to opt to contain inflation risks through its communication rather than tightening. We now expect the Bank of England to keep interest rates on hold for the remainder of the year.”
