Bank of England’s Monetary Policy Statement (11th May 2017).

posted in: Monetary Policy, Notes | 0
Weaker consumption in Q1
“Aggregate demand slowed markedly in 2017 Q1…The slowdown appears to be concentrated in consumer-facing sectors, partly reflecting the impact of sterling’s past depreciation on household income and spending….consumption growth will be slower in the near term than previously anticipated before recovering in the latter part of the forecast period as real income picks up.”
Improved global outlook
“The outlook for global activity continues to improve.  Business surveys and Bank Agents’ reports imply that business investment growth is likely to be higher in 2017 than previously projected. The stronger global outlook and the level of sterling are providing incentives for many exporters to renew and increase capacity.”¨
Inflation has risen above target
“CPI inflation has risen above the MPC’s 2% target as the depreciation of sterling has begun to feed through to consumer prices….The MPC expects inflation to rise further above the target in the coming months, peaking a little below 3% in the fourth quarter.”
There will be consequences to Brexit
“Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years”
A smooth Brexit will help in achieving targets
“In the final year of the forecast, however, the output gap closes and inflation rises slightly further above the target. This is conditioned on the assumptions that the adjustment to the United Kingdom’s new relationship with the European Union is smooth, and that Bank Rate follows the market-implied path for interest rates.”
http://www.bankofengland.co.uk/publications/Pages/news/2017/003.aspx