(Alliance News) - The Bank of England kept interest rates unchanged on Thursday and raised its forecast for 2021 economic growth.
The Bank of England's nine-strong Monetary Policy Committee voted unanimously to keep the Bank Rate at 0.1%. It also kept the asset purchases steady at GBP895 billion as widely expected.
Looking ahead, BoE said that it does not intend to tighten monetary policy until there is "clear evidence" that inflation can achieve the bank's 2.0% target sustainably. UK consumer inflation was only 0.7% in March.
The BoE said UK gross domestic product is expected to rise sharply in the second quarter, but activity is likely to remain on average around 5% below its level in the fourth quarter. GDP is expected to recover strongly to pre-Covid levels over the remainder of this year in the absence of most restrictions on domestic economic activity, the central bank added.
However, the BoE noted that after 2021 the pace of GDP growth expected to slow as boost from reopening wanes.
In addition, the BoE upgraded its UK economic growth outlook to 7.25% in 2021 from 5.0% predicted in February. The central bank also expects GDP of 5.75% in 2022, down from 7.25% previously.
Turning to inflation, the BoE expects CPI of 2.5% in 2021, up from 2.0% in its previous forecast and 2.0% in 2022, down from 2.5%.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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