The Bank of England is set to hold interest rates at 0.5% today as a sharp slowdown in economic growth is expected to put plans for a rise on the back burner.
The projections are conditional on the main interest rate rising to 1.1 percent in two years and to 1.2 percent in three years.
Despite the large downgrade to Q2 growth forecasts, the Bank did not change it's Q2 2019 and 2020 forecasts, however, which remained at 1.7% (see table below).
Britain's blue chip FTSE 100 index cut losses to trade flat in percentage terms after the BOE kept rates on hold.
Data published earlier on Thursday appeared to confirm that, showing industrial output inched up by 0.1 percent month-on-month in March, slightly below analysts' forecasts for 0.2 percent growth.
A very weak economic performance during the first quarter makes a second rate rise in six months unlikely, but such a move is still possible.
Last November, the bank raised its main interest rate for the first time in a decade, taking back the rate cut it enacted in August 2016, in the immediate aftermath of Britain's surprise vote to leave the European Union.
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The Bank of England has elected to keep the interest rate at 0.5% despite continued speculation that a rise is imminent.
"As Governor Carney stated in his remarks in an interview in April, the MPC is, "conscious that there are other meetings over the course of this year" and although the consensus view has been that a hike would come with an inflation report, this does not have to be the case".
Though the Bank's Monetary Policy Committee (MPC) said that the lower-than-expected economic growth in the first quarter was likely to be a temporary blip, the majority of its nine members preferred to wait and see how future growth would pan out.
While Ian McCafferty and Michael Saunders reiterated their support for an immediate increase, investors pared their bets on a rate hike this year.
"An ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to its target at a conventional horizon", the BOE said. "Markets were then pricing in a 90% chance of a rate rise at this month's policy meeting".
However, a string of bad data has led this to drop to just 8% with United Kingdom inflation falling to 2.5% in March, its lowest level in 12 months while the economy grew just 0.1% in Q1, the slowest rate since Q4 2012 and missing analysts' expectations of 0.3% growth.
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.