Bank of England “will tolerate higher inflation” as growth forecasts raised to 2.0% for 2017
Date: 02/02/2017
The Bank of England have just released their forecasts which show a more positive tone with UK growth forecasts raised. The Bank stated that it has increased its growth expectations in 2017 to 2.0% and expects growth of 1.6% in 2018 and 1.7% in 2019. This reflects the fiscal stimulus announced in the Autumn Statement coupled with “firmer momentum in global activity” that has shown higher global equity prices and more supportive credit conditions.
Interest rates have remained unchanged at 0.25% with the Bank stating that it will tolerate higher inflation due to a weaker pound as the UK adjusts to its new international trading arrangements. Inflation is expected to reach 2.7% in 2017, 2.6% in 2017 and 2.4% in 2019. The Monetary Policy Committee (MPC) indicated that they feel their current stance of monetary policy remains appropriate to balance the cost of higher unemployment and weaker growth should there be a change enacted at present. This was expected and so no dramatic moves have been seen in the market. The MPC will next meet on Thursday 16th March 2017.
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