The Bank of England held on to a 0.25% key interest rate and left its quantitative easing program unchanged during its monetary policy meeting on Aug. 2.
As announced on Aug. 3, the monetary policy committee voted 6-2 on the interest rate decision, but voted unanimously on maintaining the stock of sterling-denominated, non-financial investment-grade corporate bond purchases at £10 billion and the stock of U.K. government bond purchases at £435 billion.
The two dissenting members, Ian McCafferty and Michael Saunders, wanted to increase the bank rate by 25 basis points. The committee voted 5-3 in June to kept rates on hold. Since then, one of the dissenters, Kristin Forbes, has left the central bank.
Meanwhile, the central bank reduced economic growth estimates to 1.7% for 2017 and 1.6% for 2018 from 1.9% and 1.7%, respectively. "The anticipation of Brexit and related uncertainties are likely to dampen investment growth somewhat," according to the latest inflation report. The GDP growth estimate for 2019 remained 1.8%.
The sluggish GDP growth in the short-term comes as the squeeze on households' real incomes drags down consumption, the bank said. The pound was trading at $1.3157 as of 12:44 p.m. London time, down 0.5% from a day earlier, Bloomberg News reported.
Consumer prices rose to 2.6% in June from 2.3% in March, and inflation is expected to rise further in coming months, to peak around 3% in October, as the past depreciation of sterling continues to pass through to consumer prices. The bank's inflation target is 2%.
The central bank said its projections are based on a "smooth" Brexit.
The committee said if the economy performs as expected, the monetary policy could need to be tightened by "a somewhat greater extent" over the forecast period than markets currently anticipate.