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March 17, 2017

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BOE votes to keep interest rate at 0.25%

THE Bank of England has voted to keep its main interest rate at a record-low 0.25 percent despite concerns over rising inflation, the central bank said yesterday after a regular meeting.

The Monetary Policy Committee voted 8-1 to hold the rate in the last such BOE meeting before the UK triggers the process to exit the European Union.

The BOE also voted to leave the level of its cash stimulus program pumping around the UK economy at 435 billion pounds (US$537 billion).

“Sterling surged after one member of the MPC voted for a rate hike at the last meeting and the language of the statement appeared more hawkish,” said analyst Alex Edwards at trading firm OFX.

“It’s come as a positive surprise for the pound, at least in the short term, but it’s hardly a huge change in sentiment amongst the committee.”

Although UK economic activity has performed better than expected following its June referendum in favor of Brexit, the BOE yesterday said it “expects a slowdown in aggregate demand over the course of this year, as household demand growth declines in reaction to lower real income growth.”

It added: “Official estimates of retail sales have weakened, consistent with this expectation, although other indicators of consumer demand such as consumer confidence have been steadier.”


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