LONDON (AP) — The Bank of England indicated Thursday that interest rates may be on the up soon as it painted a fairly rosy picture about the near-term prospects for the British economy following the lifting of lockdown restrictions in the wake of the rapid rollout of coronavirus vaccines.
In a statement accompanying its decision to keep the bank's main interest rate unchanged at the record low of 0.1%, the rate-setting Monetary Policy Committee said “some modest tightening of monetary policy” over the coming period “is likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term.”
The most recent figures showed the annual rate of inflation in the U.K. at 2.5% following a spike largely in energy prices. The latest forecasts show the bank expects inflation to pick up to 4% in 2021, which would be the highest level since 2011 and double the bank's target.
“There are good reasons to believe that above-target inflation will be temporary," Bank Governor Andrew Bailey told a press briefing. "If this outlook appears to be in jeopardy, the MPC will not hesitate to act.”
For now, the eight-member panel unanimously voted against any increase in rates. The panel also maintained the bank’s monetary stimulus at current levels though one of the eight members voted to reduce the level of asset purchases from 875 billion pounds ($1.2 billion) to 830 billion.
Armed with quarterly economic projections, also published Thursday, the rate-setting panel said “a waning impact” from COVID-19 would boost demand growth and help the British economy reach its pre-pandemic level by the end of the year.
It said the British economy is set to rebound by 7.25% this year following the lifting of lockdown restrictions, unchanged from its previous projection....