The Bank of England held interest rates steady yesterday and said weak growth during a snowy start to 2018 was likely to be only temporary, but it wanted to see a pick-up in the economy in the next few months before raising borrowing costs.

In sharp contrast to expectations a few weeks ago that it would raise rates, the BoE said its nine rate-setters voted 7-2 to keep them at 0.5 per cent. That was in line with forecasts polled in the past week.

Governor Mark Carney said the BoE  expected the economy would pick up speed again and it was sticking to its message that rates would probably need to rise.

Investors slightly pushed back their expectations of when that was likely to happen.

“The judgement relies on the economic data being broadly consistent with the Monetary Policy Committee’s projections,” Carney told reporters.

Sterling fell close to a four-month low against the dollar, reversing earlier gains, and the yield on two-year British government bonds, which are sensitive to moves by the BoE, eased modestly.

“It looks like the 2018 rate hike has been delayed not cancelled,” Fitch Ratings chief economist Brian Coulton said.

“But the area that is probably giving them most grounds for pausing is the recent weakening in consumption indicators, which could be flagging a bigger downside risk to the growth outlook.”

Britain’s economy grew more slowly than most of its peers last year after a Brexit-driven jump in inflation hit consumer spending power and some businesses delayed long-term investment.

Growth slowed even more sharply in the first quarter of 2018 on a mix of unusually snowy weather and headwinds from Britain’s impending EU exit. Surveys have suggested little rebound last month.

For now, most policymakers wanted to wait to be sure that the economic weakness passed quickly.

Recent data “had been consistent with a temporary soft patch, with few implications for  the outlook for the UK economy,” most of the BoE’s rate-setters said. “There is value in seeing how the data unfolds over the coming months.”

Despite weak growth, the BoE sees the need for rate hikes because it thinks the economy, hurt by weak productivity and lower immigration due to Brexit, risks overheating.

Carney – who in February said rates might go up sooner than the BoE had previously suggested – was asked by a reporter about the description of him as an ‘unreliable boyfriend’ which was first used by a British lawmaker because of his previous failed signals about when rates might rise. Policymakers Ian McCafferty and Michael Saunders, who again voted for a rate rise, agreed the weak growth so far this year reflected ‘temporary or erratic factors’, but said delaying a rate hike risked more abrupt tightening later on.

Inflation was seen dropping to 2.1 percent in a year’s time, and returning to target a year later but only if interest rates rose by 25 basis points about three times over three years, as markets expect.

The BoE said the economy would grow by 1.4 per cent this year, down from 1.8 per cent it predicted in February. That cut reflected the weakness at the start of the year which would probably be revised up, it said.

For 2019 and 2020, it predicted GDP growth would pick up to 1.7 percent, down from 1.8 per cent in its February forecasts.

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