Bank of England gearing up to increase interest rates

Pound to euro exchange rate

"Today's data reinforces the message that the United Kingdom continues to underperform other developed market economies, growing at around half the rate of the USA and the eurozone", said James Knightley, chief worldwide economist at ING.

Optimistic traders are pricing an interest rate hike as early as May; if this seems likely in the months ahead then the Pound could also firm.

Although British inflation has been running well above its 2 percent target, due in large part to the fall in sterling after the Brexit vote, the BoE has raised rates only once so far since the 2007-09 financial crisis - in November - while the U.S. Federal Reserve has raised them five times.

"It's likely the path of interest rates required to get inflation back to target over the medium term is itself slightly higher", Broadbent said in an interview with the BBC.

Policymakers also unanimously made a decision to maintain the quantitative easing at GBP 435 billion. This language was similar to that of their September meeting which came a month before the first hike. Today, the price of crude oil has soared to the highest level in three years, which could affect the country's inflation.

This gloomy outlook over price growth has therefore suggested that the RBA does not feel conditions in the economy will warrant a tightening of borrowing costs for some time yet, with the next rate hike potentially not arriving until 2019, assuming the current economic uptrend does not accelerate above forecasts.

The Bank also cautioned that Brexit remained the biggest threat to growth, while households continue to be squeezed by poor wage growth and falling inflation.

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Governor Mark Carney and the rest of the Monetary Policy Committee are leaving a lot to chance over Brexit. They wanted to hear whether any committee member would dissent and bring more hawkish views. In the conference, Carney talked about their thinking about the current United Kingdom economy, the uncertainties ahead, and the risks associated with Brexit.

But it will fuel criticisms that long-term economic forecasts are inaccurate and can not be trusted - just as the Government has been forced to publish reports about the possible economic impact of Brexit.

They said the United Kingdom will grow by an extra 0.4 per cent in 2018 and said that rate of acceleration will be sustained into 2019 too.

The UK has just gone through a period, lasting almost nine years, during which interest rates were held at record low levels. As of this writing, it is trading at the 1.3976 level.

Combined, markets have now overwhelmingly come to expect a rate increase from the bank as early as May - a prospect that sent the Pound flying.

While some lawmakers in Prime Minister Theresa May's party want close ties with the remaining 27 European Union nations and a period of transition, others want a more fundamental break that would see Britain diverge more profoundly on matters related to regulations and trade.

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