The Bank of England released their inflation report following a self-imposed 6 week quiet period for the UK general election. The Bank revised their estimates for growth in 2015 from 2.9% 2.5% and 2.9% to 2.6% in 2016. At the same time the report highlighted their view that inflation was expected to rise notably, once the short-lived factors such as fall in crude price dissipate.
The base interest rate has been at 0.50% for the last 6 year, with inflation for multiple years overshooting its target of 2%, with the most recent reading being zero. If the central banks remit is to target inflation at 2%, then it is likely the MPC will sit on its hands and leave interest rates on hold until early 2016.
Cable was choppy around the release, but then weakened in the hours following, before reversing earlier moves on US data that missed analysts’ expectations.