Bank of England expected to keep interest rates at 0.25%

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But he said the United Kingdom was "a little bit" better placed to cope with an interest rate rise. It maintained its forecast for growth of 1.8% in 2018.

Commenting on today's interest rate decision and inflation report by the Bank of England's Monetary Policy Committee, Dr Adam Marshall, Director General at the British Chambers of Commerce (BCC), said: "The Bank of England's decision to keep interest rates unchanged is unsurprising, and reflects the more subdued levels of growth we have seen in United Kingdom business communities over recent months".

However, two members of the committee - Ian McCafferty and Michael Saunders - voted to raise borrowing costs and the Bank signalled that investors should prepare themselves for more interest rate increases than they now expect. It also fell around a cent against the dollar, plumbing a three-day low of $1.3140, having earlier reached an 11-month high of $1.3267 against the USA currency.

"The Bank of England has also downgraded its growth forecasts for 2017, on the back of a pretty disappointing first half of the year".

Earlier, the BOE made a decision to leave the interest rate unchanged with a vote of 6 against 2, as expected.

In its latest report, the National Institute of Economic and Social Research (NIESR) predicted the Bank would raise rates in the first quarter of next year as the economy starts to recover.

Today the Bank voted to keep rates at 0.25 per cent, by a margin of six votes to two. Kristin Forbes, one of the MPC (Monetary Policy Committee) members to back a rate rise in June, departed the group and was replaced by Silvia Tenreyro, an academic at the London School of Economics.

He said the drop in sterling following the Brexit vote had fuelled inflation.

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A Brexit transition deal that reduces access to the customs union and the Single Market will harm the British economy, according to Bank of England governor Mark Carney.

Interest rates may increase faster in the future than financial markets have priced in, the Bank of England's (BoE) deputy governor has said.

"Attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth".

The combination of high rates of profitability, especially in the export sector, the low cost of capital and limited spare capacity supports investment by United Kingdom firms over the forecast period, offsetting the effect of continued uncertainties around Brexit.

Badiani said he thought the BOE will remain tolerant of inflation above its monetary policy target of 2 percent.

Financial market prices now imply a rise in Bank Rate in 2018 Q3, compared with 2019 Q4 at the time of the May Report.

Fabrice Montagne, chief United Kingdom and senior European economist at Barclays, said: "We expect the Bank of England to downgrade its forecast in order to reflect disappointing data".

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