The Bank of England kept its main interest rate at the record low of 0.1% on Thursday and updated its growth predictions for the British economy following the lifting of many coronavirus lockdown restrictions.
In a prepared statement accompanying its decision, the bank’s rate-setting Monetary Policy Committee voted unanimously to keep borrowing rates unchanged.
It sounded a relatively upbeat tone about the British economy since the committee last met in early May. It said bank staff have revised their expectations higher for second quarter growth by around 1.5 percentage points since then as restrictions on economic activity have eased. The bank now expects output in June to be only around 2.5% below its level in the fourth quarter of 2019, just before the pandemic start.
It said the recovery has been most pronounced in the consumer-facing services for which restrictions were loosened in April.
Restrictions across the UK have been lifted over recent months following a monthlong winter lockdown. However, the most recent planned easing for England that had been due to begin this week, lifting of all remaining restrictions on social contact, was delayed by four weeks because of a resurgence in the virus, this one the more dangerous delta variant.
The committee appeared to take a fairly sanguine view on the recent spike in inflation. Like others, the UK has seen price pressures increase in recent months as the global economy rebounds.
It said it does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.
Inflation in the UK rose in the year to May to 2.1%, above the bank’s target of 2%.