CPI inflation is now 2.5 percent, according to the latest figures for March. Inflation has been falling a little faster than the Bank expected it to, and it is now expected to drop down to the target 2% within the next couple of years, regardless of any change in interest rates.
The Bank of England looks set to leave interest rates unchanged yesterday, after surprisingly weak data and cautious remarks from Governor Mark Carney dashed expectations of what until a few weeks ago looked a near-certain increase.
The Pound might appreciate on such a result, given that there are still lingering hopes for the BoE interest rate to hit 0.75% this year.
The rate was further lowered by 25 basis points in the wake of the Brexit vote in the summer of 2016 and was raised back to 0.5 percent at the end of a year ago.
Markets are reluctant to take his statements regarding gradual rate rises at face value, but also due to the bank downgrading its growth forecasts for 2018 from 1.8 per cent to 1.4 per cent.
The Pound to Australian Dollar (GBP/AUD) exchange rate could find a rallying point next week, however, with the release of the Reserve Bank of Australia's (RBA) meeting minutes.
That was in line with forecasts from economists polled by Reuters in the past week.
Data published earlier on Thursday appeared to confirm that, showing industrial output inched up by 0.1 percent month-on-month in March, slightly below analysts' forecasts for 0.2 percent growth.
The MPC forecast GDP growth averaging 1.75 percent for each of the years up to 2020.
Since he joined the BoE in 2013, Carney has signaled several times that the time was nearing for rates to rise from the historic low of 0.5 percent they reached during the 2008-09 financial crisis, only for economic data to go the wrong way.
"Another poor decision. keeping interest rates at 0.5 pct despite nine years of economic recovery, a buoyant global economy, above target inflation and the lowest unemployment rate for 43 years", said Andrew Sentance, a former Bank of England policymaker, on Twitter.
As markets reassess the implications of the Bank of England's (BoE) May policy decision the Pound to Australian Dollar (GBP/AUD) exchange rate has found some measure of support.
MUFG's Hardman said the market had "overreacted" in its assessment of the BoE's decision, citing the meeting's minutes that suggested most MPC members saw the need for a rate rise but wanted to see more data before they acted.
The bank's decision follows a run of softer-than-expected United Kingdom economic data, which saw markets hastily revise their initial expectation that the BoE was on track to deliver its first hike of 2018 this month.
"The MPC acknowledged that inflation had fallen faster than expected in the first quarter, which it attributed primarily to the impact of the past depreciation of sterling fading a little faster than previously thought", said Archer.
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