Bank of England resists interest rate rise

Over this three-year horizon, it is likely that rates will rise by more.

How households have seen interest rates change over the last couple of years.

As recently as a couple of weeks ago, financial markets were factoring in a 90 percent probability that the central bank would increase in May its base interest rate by a quarter point to 0.75 percent.

The Inflation Report added inflation had fallen back "more rapidly than expected" at its February meeting, with "pass-through of the past depreciation of sterling to import prices" is "somewhat smaller than previously thought".

Kevin Doran, chief investment officer at AJ Bell, said that the Bank's announcement "heaps more pain on savers who have already lost a third of their purchasing power over the past 10 years as inflation has comfortably outstripped the meagre interest earned on their cash". The bank's quarterly economic forecasts suggest the next increase may not happen until the latter part of this year, though.

Mark Carney, Bank of England governor indicated in the press conference that the BoE's assessment is that much of this weakness is temporary and can be attributed to the weather.

Just a month ago a rate hike from 0.5% to 0.75% seemed a near certainty, but poor United Kingdom economic data in recent weeks, as well as a dovish speech from Governor Mark Carney, dampened expectations for any movement in policy. The negotiations are likely to remain contentious in the near-term, both within the United Kingdom political sphere and between the United Kingdom and EU.

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The Bank of England held interest rates steady on Thursday and said it wanted to be sure the British economy was recovering from a slow start to the year before it raised borrowing costs again. A rate hike remained "likely" this year he added, after noting economic data had been "mixed". Policymakers are not likely to take hikes off the table this year, as some forecasts have attached credence to.

"The balancing factor to the debate is that real wage growth is now in a healthier state, but not strong enough to tip the balance this month". But very weak UK GDP growth figures and fast-retreating inflation has seen a rapid reversal of the Old Lady's increasingly unhelpful forward guidance.

The Office for National Statistics (ONS) reported that the UK's industrial production climbed 0.1 per cent month-on-month - consistent with the previous period but below the forecast for 0.2 per cent.

How the Bank now sees inflation playing out over the next three years.

In another sign of slow growth in 2018, the British Retail Consortium said on Wednesday that overall retail spending contracted by 3.1% year-on-year in April.

Archer noted that the MPC had indicated in its minutes that it believed growth in the first quarter was greater than the initial estimates, pointing towards an upward revision when more data becomes available to about 0.3 percent, which is in line with recent rates of growth.

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