Bank of England likely to leave interest rates on hold as economy outperforms

World - Mohit Shah - Feb 02,2017

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bank of england likely to leave interest rates on hold as economy outperforms

It is expected that the Bank of England (BOE) would leave interest rates at a record low of 0.25 percent on Thursday, due to a strong finish by the U.K economy into year end.

The current robust economic performance in the United Kingdom has indeed performed better than consensus expectations after the EU referendum launched in late June. The Bank of England is also seen rising its growth outlook for the nation.

The new figures, issued in November's Quarterly Inflation Report, forecast 1.4 percent growth for 2017 along with a growth rise of 1.5 percent for 2018 and 1.6 percent expected for 2019.

The central bank is also seen to improve its unemployment outlook post the latest labour force data revealed unemployment soaring at an 11-year low of 4.8 percent with a slight lift in wage growth close to 2.8 percent by the end of 2016.

However, it is still unclear whether the BOE will separately alter its inflation forecasts; the current statistics from last November predict that inflation remains on track to hit 2.8 percent in 2017 before dipping to 2.7 percent in 2018 and later reaching 2.5 percent by the following year.

The currency solidification also clouds the inflationary picture slightly, said Kallum Pickering, the senior U.K. economist at Berenberg.

He further added, stronger expected demand growth comparative to potential supply growth will perhaps raise the BoE's assessment of underlying inflationary burden.

Laith Khalaf, senior analyst at Hargreaves Lansdown said the minutes of the MPC meeting will be pored over for any trace of interest rates rise, however, the reality is that whether there's a surge this year or not, rates are expected to remain low for a substantial time.