UK kept key interest rate unchanged

Noam Stiekema

Bank of England (BoE) maintained the key interest rate, although the data showed that consumer prices in the UK fell in April on an annual basis for the first time in more than half a century. The Monetary Policy Committee of the bank left unchanged its key interest rate at 0.5% and maintain the volume […]

UK economyBank of England (BoE) maintained the key interest rate, although the data showed that consumer prices in the UK fell in April on an annual basis for the first time in more than half a century. The Monetary Policy Committee of the bank left unchanged its key interest rate at 0.5% and maintain the volume of purchased debt level of 375 billion GBP per year. The decision coincided with the forecasts of most analysts. The GBP has lost little of its value, but still ahead of the day against the USD.

Data published in late May, showed that consumer prices fell by 0.1% yoy in April. This is the first annual decline in prices in the UK since 1960. A slowdown intensified fears of deflation in the third largest economy in Europe. One such development would undermine directly to consumers, business and the state, making it difficult to service their debts. The latest forecasts of the central bank show that authorities expect annual inflation to accelerate to 2% in 2017. Until then, the institution will probably take sharp adjustment of monetary policy. Investors expect the BoE to start slowly raising borrowing costs in mid-2016.

Britain was the fastest growing economy among the G7 countries in 2014, but growth stalled in the first quarter of this year. Official data showed the economy expanded only 0.3% in the first three months of 2015. On an annual basis does the expansion was 1.2%.

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