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    Bank of England warns of rising inflation, but rates held

    LONDON (AP) — The Bank of England kept its main interest rate at the record low of 0.1 per cent on Thursday even though it warned that inflation pressures are rising as the British economy bounces back following the lifting of many coronavirus lockdown restrictions.

    In a prepared statement accompanying its decision, the bank’s rate-setting Monetary Policy Committee voted unanimously to keep borrowing rates unchanged.

    The committee also kept its stimulus programme unchanged, though one member — Chief Economist Andy Haldane at his last meeting before becoming the Chief Executive of the Royal Academy of Arts — voted to reduce the scale of support given the improving economic outlook, and rising cost and price pressures.

    Both decisions had been widely anticipated in financial markets.

    The committee sounded a relatively upbeat tone about the British economy but offered few hints about when it will begin withdrawing some of its stimulus or increasing borrowing rates.

    It said the recovery has been most pronounced in the consumer-facing services, such as retail and hospitality, for which restrictions were loosened in April.

    The recovery has been stronger than the bank anticipated, and as a result it raised its second-quarter growth forecasts for the British economy by around 1.5 percentage points. It now believes output in June will only be about 2.5 per cent below the fourth quarter of 2019, just before the pandemic triggered a recession.

    Pedestrians walk past the Bank of England in London. PHOTO: AP
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