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		</div><p>The Bank of England has warned economic growth will remain &#8220;sluggish&#8221; as it kept interest rates on hold amid a tightening squeeze on family incomes.</p>
<p>Policymakers on the Bank’s Monetary Policy Committee (MPC) voted 6-2 to keep rates at 0.25%, with fewer members this month calling for a rise as lacklustre economic growth has weakened support for a hike.</p>
<p>In its quarterly inflation report, the Bank cut its forecasts for growth to 1.7% in 2017 and 1.6% in 2018 and cautioned the squeeze on household incomes would continue, with inflation still expected to surge close to 3% in the autumn.</p>
<p>But it signalled rate hikes will be needed over the next few years to rein in Brexit-fuelled inflation and said borrowing costs may need to rise by more than expected in financial markets.</p>
<p>Members also voted to withdraw part of the mammoth economy-boosting package unleashed a year ago in the aftermath of Brexit.</p>
<p>It will call time on the Term Funding Scheme to offer cheap-finance to banks from next February, although it said it was now expected to offer £15 billion more under the scheme &#8211; at £115 billion.</p>
<p>In minutes of the rates decision, the Bank said: <i>&#8220;In the MPC’s central forecast, gross domestic product (GDP) remains sluggish in the near-term as the squeeze on households’ real incomes continues to weigh on consumption.&#8221;</i></p>
<p>On rates, it reiterated that &#8220;some tightening of monetary policy&#8221; would be needed to cool inflation and by a &#8220;somewhat greater&#8221; extent than markets expect.</p>
<p>Markets are currently forecasting the first rise in the third quarter of next year and another in 2020.</p>
<p>But the Bank stressed that any hikes would be &#8220;gradual&#8221; and &#8220;limited&#8221;.</p>
<p>The Bank’s downgraded growth forecasts for this year and next compare with the 1.9% and 1.7% predicted in May. It maintained its forecast for growth of 1.8% in 2018.</p>
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">
<p lang="en" dir="ltr">We&#39;ve published our latest quarterly <a href="https://twitter.com/hashtag/InflationReport?src=hash&;ref_src=twsrc%5Etfw">#InflationReport</a> <a href="https://t.co/DXpoYeEi8y">https://t.co/DXpoYeEi8y</a> <a href="https://twitter.com/hashtag/SuperThursday?src=hash&;ref_src=twsrc%5Etfw">#SuperThursday</a></p>
<p>&mdash; Bank of England (@bankofengland) <a href="https://twitter.com/bankofengland/status/893066392752226305?ref_src=twsrc%5Etfw">August 3, 2017</a></p></blockquote>
<p><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></p>
<p>Sterling fell against the dollar and the euro following the news. The pound was 0.5% down at 1.31 US dollars and fell 0.4% to 1.11 euros.</p>
<p>The no-change decision comes after recent disappointing growth figures have dampened mounting expectations of a hike, with GDP edging up to 0.3% in the second quarter from 0.2% in the previous three months.</p>
<p>Growth is likely to remain at 0.3% in the third quarter, although it will start to pick up slightly at the end of the year, according to the Bank.</p>
<p>Its latest inflation report offered little cheer for households being hit by soaring inflation and paltry pay rises as it said the squeeze will get worse before it gets better.</p>
<p>It added that monetary policy &#8220;cannot prevent&#8221; the hit to incomes over the next few years, but expects wages will recover &#8220;significantly&#8221; towards the end of its three-year forecast.</p>
<p>The economy is also set for a boost from surging demand for British goods thanks to the weak pound, which will offset some of the lower consumer spending.</p>
<p>The decision comes a year after rates were cut to 0.25% last August following the shock EU referendum vote, which sent the pound slumping.</p>
<p>The Bank estimates it will likely take four years to fully feed through to prices and the economy.</p>
<p>Prior to the Bank’s latest rates verdict, there had been growing clamour for a rate rise as inflation ramped up pressure on hard-pressed households, with three policymakers calling for an increase to 0.5% in July.</p>
<p>Inflation eased back to 2.6% last month from 2.9% in June, although the Bank said this was expected and will pick up once again over the coming months.</p>
<p>The Bank said the overshoot relative to its 2% target was &#8220;entirely&#8221; down to the weak pound.</p>
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