BOE Sees Faster UK Growth in Second Quarter

        By Jason Douglas and Jon Sindreu
        LONDON--Bank of England officials expect economic growth in the U.K. to accelerate in the second quarter following a soft start to the year, minutes of officials' most recent policy meeting showed Wednesday.
        Minutes of the Monetary Policy Committee's May policy meeting showed all nine members of the panel voted to keep the BOE's benchmark interest rate at a record low of 0.5% this month and to maintain the size of the central bank's bond portfolio at 375 billion pounds ($581.20 billion).
        For two members, probably rate-setters Martin Weale and Ian McCafferty, who last year advocated raising interest rates to keep inflation in check, this month's policy decision was "finely balanced" between voting for a rate rise and keeping borrowing costs unchanged, the minutes record.
        The panel forecast that economic growth will pick up in the second quarter following a slow start to the year, as falling prices for food, energy and other goods boost household incomes and fuel consumer spending.
        BOE staff expect quarter-on-quarter growth in the second three months of the year to accelerate to 0.7%, the minutes record. Official estimates put first-quarter growth at just 0.3%, although the BOE said it expects later revisions will show growth was closer to 0.5%.
        Official data Tuesday showed consumer prices in the U.K. fell on the year for the first time in more than half a century in April, raising the specter of deflation in Europe's third-largest economy.
        But BOE officials led by Governor Mark Carney say they expect price-growth to resume towards the end of the year, fueled by faster growth in wages and a recovery in oil prices. Minutes of May's policy meeting show the MPC expects annual inflation to accelerate "notably" towards the end of 2015 and return to its 2% target by early 2017.
        Investors expect the BOE to begin slowly raising its benchmark interest rate in mid-2016. Officials have "a range of views" over the future path of interest rates, according to May's minutes, but all agreed it is more likely than not that borrowing costs in the U.K. will rise over the next three years.
        -Write to Jason Douglas at jason.douglas@wsj.com and Jon Sindreu at jon.sindreu@wsj.com
        (END) Dow Jones Newswires

        May 20, 2015 04:36 ET (08:36 GMT)

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