MPC members at the BOE voted unanimouslyto keeping both interest rate and APF quantity unchanged in May, as shown by May minutes. The nine members preferred to keep interest rate low at 0.5% and APF at 200 billion pounds as growth risks stemming from sovereign debt in Europe eclipsed worries about high inflation that reached 3.7% in April. While some members focused more on the negative impact of debt crisis in euro area on U.K. others were more concerned about price acceleration.
With regard inflation, the bank predicts inflation to approach the target over the medium term as the downside pressure from the substantial margin of spare capacity would outweigh effect of the rise in oil prices, sterling's depreciation and the reverse of the VAT. On the other hand, Osborne, Chancellor of the Exchequer, will hold emergency budget on June 22 to cut the huge deficit that reached 12% of GDP last year.