UK MPC left policy unchanged this month against a backdrop of looming deflation. The MPC will have seen a preview of March’s inflation figures at its meeting and these could well have shown inflation falling from zero in February into negative territory. While it is doubtful that a rate cut will have been given serious consideration, a rate rise is still some way off. Indeed, the recent rise in the pound, weakening in the inflation outlook, softer US news and sharper planned government spending cuts suggest that interest rates will rise even more gradually than we previously expected. According to Capital Economics – “Rates will remain on hold until the second quarter of next year and are expected to end 2016 at 1%.”
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