Taken from Financial Reporter:
At its latest meeting, the MPC voted unanimously to maintain Bank Rate at 0.5%, despite some economists predicting members to vote for a decrease.
Twelve-month CPI inflation increased to 0.5% in March and globally, sentiment in financial markets has improved. However "large drags from energy and food prices" remain and core inflation remains subdued as a result of weak global price pressures and restrained domestic cost growth.
In the UK, activity growth slowed in Q1 and a further deceleration is expected in Q2 as uncertainty associated with the EU referendum begins to weigh on activity.
The MPC said that the referendum is "making the relationship between macroeconomic and financial indicators and underlying economic momentum harder to interpret at present".
It confirmed that growth over the forecast horizon is expected to be slightly weaker than in the February projection.
The MC predicts a return of inflation to the 2% target by mid-2018 and judges that it is more likely than not that Bank Rate will need to be higher by the end of the forecast period than at present to ensure inflation returns to the target in a sustainable manner.
In its report, the Committee said that with macroeconomic and financial indicators likely to be less informative than usual in light of the referendum, the Committee is currently reacting more cautiously to data releases than would normally be the case.
The most significant risks to the MPC’s forecast concern the referendum. It believes that a "vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy".
It said that a Brexit could "lead to a materially lower path for growth and a notably higher path for inflation than in the central projections set out in the May Inflation Report".
