As economy weakens, Bank of England holds off on rate hike

"A month after playing down expectations of a rate hike, the Bank of England raised few eyebrows as it announced that interest rates would be remaining at 0.5%".

The Bank of England's monetary policy committee Thursday made a decision to keep interest rates on hold.

The preliminary estimate of GDP growth in the first quarter was 0.1%, 0.3 percentage points lower than expected in February.

Speaking at the press conference upon the release of the report, governor of the BoE Mark Carney added: "The underlying pace of growth remains more resilient than headline data suggests". Carney has been labeled an "unreliable boyfriend", having already in the past flagged up a rate hike only to back out later.

"They expect us not to be on some pre-set course".

Recent data "had been consistent with a temporary soft patch, with few implications for. the outlook for the United Kingdom economy", most of the BoE's rate-setters said.

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Investors appear unclear as to what's likely to happen next.

That has roiled markets, first driving the pound to its highest since the June 2016 Brexit vote and then down sharply again. "Stock markets don't tend to like rising interest rates much, so an environment where rates rise only gradually should be supportive for the United Kingdom stock market". Now it's just 10 percent or so. Previously the cost of borrowing had been decided between the chancellor and the governor of the Bank. This fall in inflation was larger than predicted, further strengthening the case against the Bank of England upping rates in May. Thursday's forecast shows inflation should drop to 2.4 percent by year-end, instead of the previously forecast 2.7 percent. That matters as the Bank of England's primary mission is get inflation close to 2 percent.

Quilter's Gillham concluded: "By holding off from a rate rise today, the Bank gives itself breathing room to raise rates later in the year if the picture improves".

Earlier on Thursday the BoE left rates steady and said weak growth during a snowy start to 2018 was likely to be temporary, but it wanted to be sure the economy was picking up in coming months before raising borrowing costs.

However, as with everything related to the British economy, much depends on the Brexit discussions.

Tim Focas, director of financial services at Parliament Street says that caution is advised, but Mr Carney's position on Brexit remains questionable.

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