Bank tipped to hold fire on interest rate increase

THE Bank of England is expected to hold fire on increasing interest rates next week, putting off its long-anticipated rise after economic growth almost ground to a halt.

Economists have pushed back their expectations for another rate increase to at least August – and possibly not until 2019 – after recent official figures showed the economy grew at its slowest pace in five years in the first quarter.

Gross domestic product (GDP) slowed sharply to 0.1 per cent, down from 0.4% in the previous three months as the impact of February and March’s snowy weather compounded woes in consumer-facing and construction sectors.

There are also fears the first-quarter slowdown may not just be a weatherrelated blip, with official data revealing more widespread weakness and survey data for April showing little sign of a bounce-back.

With the Bank likely to cut its growth forecasts in Thursday’s accompanying inflation report, most experts believe policymakers would not be able to justify increasing rates until August at the earliest.

Chris Williamson, chief business economist at IHS Markit, said: ““The April survey also brought signs that jobs growth has slowed and inflationary pressures have eased, suggesting policymakers will back away from any imminent increasing of interest rates.”