The MPC’s projections are conditioned on the path for Bank Rate implied by market yields in the fifteen days to 4 May. This path rises to only 0.8% by 2019 Q2.
This is around 20 basis points lower than in the February projections and is largely due to economic uncertainty surrounding the EU referendum and lower than expected GDP growth.
The Bank of England now expects the UK to grow by 2% in 2016, down from 2.2% in the February report. GDP growth is projected to be 0.3% in Q2.
The Bank said that "quarterly GDP growth softened in 2016 Q1 and is projected to slow somewhat further in Q2 as recent increases in uncertainty weigh on activity".
The Report focused largely on uncertainty associated with the EU referendum, stating:
"A vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy. Households could defer consumption and firms delay investment, lowering labour demand and causing unemployment to rise."
At its latest meeting, the MPC voted unanimously to maintain Bank Rate at 0.5%, despite some economists predicting members to vote for a decrease.
It said that with macroeconomic and financial indicators likely to be less informative than usual in light of the referendum, the Committee is currently reacting more cautiously to data releases than would normally be the case.
However it believes that a Brexit could "lead to a materially lower path for growth and a notably higher path for inflation than in the central projections set out in the May Inflation Report".
