Twelve-month CPI inflation rose to 0.3% in January but "remains well below the 2% inflation target", predominantly to unusually large drags from energy and food prices. The Committee stated that core inflation also remains subdued, a consequence of the past appreciation of sterling, weak global inflation and restrained domestic cost growth.
A rate rise would, in the MPC’s judgement, involve too rapid an acceleration in domestic costs, one that would risk being unsustainable and would lead to undesirable volatility in output and employment.
Data releases since the February Inflation Report show 'little change' in the near-term outlook for growth.
The MPC also noted "increased uncertainty surrounding the forthcoming EU referendum which has been a "significant driver of the decline in sterling".
The MPC still maintains that it is "more likely than not" that Bank Rate will increase rather than decrease, but that this is "an expectation, not a promise".
Nick Dixon, Investment Director at Aegon UK, commented:
“General uncertainty may have forced the hand of the MPC to sit tight for the 84th month in a row. Global deflationary pressures spurred by declining commodity prices and negative interest rates are making investors turn bearish on economic fundamentals. Closer to home, cuts to forecast growth announced in the Budget strengthen the Bank’s dovish stance and there’s certainly no rush for mortgage holders to fix their borrowing rates any time before the Autumn Statement.”
