With the U.K. having held interest rates for the last seven years and stepping back from quantitative easing, the Bank of England's policy meeting this week may not fuel much excitement. But strengthening lending and inflation may mean the bank raises rates sooner than expected — possibly even this year.
On Thursday, the BoE will publish its latest policy decision, minutes from this week's meeting of the Monetary Policy Committee and its quarterly inflation report. The bank's main interest rate is seen remaining at the record low of 0.5 percent, as inflation remains well under the targeted 2 percent year-on-year increase. The consumer price index rose by 0.5 percent in the year to March, according to the latest official U.K. statistics, having gradually risen since October 2015. The U.K.'s Office for Budget Responsibility forecasts inflation will not hit 2 percent until 2018.
Expectations for a rate hike this year have abated following weakening growth forecasts since the end of 2015 and uncertainty ahead of the U.K.'s referendum in June on remaining part of the European Union. Indeed, some economists suggest that if the U.K. were to exit the union, the economic fallout could see the bank cut its main rate even further.