Bank of England Review

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"We had been expecting the BoE to send a more hawkish policy signal today, but even still we were taken by surprise somewhat by the explicit guidance delivered over the timing of future rate hikes".

Following the publication of the bank's quarterly Inflation Report alongside its rate decision, Governor Mark Carney hinted that a quarter-point hike in United Kingdom interest rates is now possible as soon as May.

The central bank's boss, Mark Carney, said on Thursday that United Kingdom interest rates may rise sooner and by a bit more than previously anticipated.

The BoE nudged up its economic growth forecasts for Britain to show an average annual expansion of 1.75 percent over the next three years with growth this year now seen at 1.8 percent, up from its previous forecast of 1.6 percent.

Investors remain on edge after the latest selloff in global equities, as a burst of volatility hit long positions amid broader concerns that rising interest rates around the world could begin to reduce liquidity.

Any indication that an interest rate hike may not be coming early this year could trigger a brief GBP/AUD exchange rate dip.

He has additionally hinted at raising United Kingdom interest rates in the near-future, assuming that Brexit negotiations continue to go smoothly.

A steeper path of interest rate rises over the next year would not be a "great shock" to the economy, the Bank of England's deputy governor said this morning.

Its forecasts at the time indicated there could be two more increases of 0.25% over three years.

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The pound surged after the report - up 0.8 per cent against the United States dollar to 1.399 and 1 per cent higher against the euro at 1.143.

The European commission is forced to upgrade its growth forecast for the United Kingdom economy to 1.5 per cent from just 1 per cent.

Today, the Bank of England's (BoE) Monetary Policy Committee (MPC) completed its two-day policy meeting.

Growth is modest by historic standards and the United Kingdom has gone from the fastest growing economy among the G7 largest global economies to the slowest.

Though the anticipated growth level is modest in historical terms, it is expected to push up inflation gradually.

When more clarity emerges over what Brexit actually will entail when Britain leaves the European Union in March 2019, Carney said the Bank of England will need to adjust its forecasts.

A second rate increase is likely to follow in November. The prospect of faster-than-expected rate increases in the United States was a significant factor behind the market correction seen at the beginning of this week.

The bank's Monetary Policy Committee (MPC) members voted unanimously to keep rates on hold, but said they would need to rise "somewhat earlier and by a somewhat greater extent" than previously outlined to prevent the economy overheating.

The chancellor replied by stressing the importance of boosting United Kingdom productivity and the government's efforts to make that happen.