The Bank of England stands by its stimulus plans, dismissing the inflation spike as transitory

• Bank of England policymakers kept interest rates at 0.1% and left bond purchases intact on Thursday.
• The Monetary Policy Committee expects the recent jump in inflation to be transitory.
• MPC members predict UK GDP will recover to pre-pandemic levels next quarter.

Bank of England policymakers have decided against paring back their efforts to stimulate the UK economy, as they expect the recent spike in inflation to be transitory.

The central bank's Monetary Policy Committee voted unanimously to keep the bank rate at 0.1% and by 7-1 to maintain total bond purchases at £895 billion ($1.25 trillion), the BOE said Thursday.

The MPC acknowledged there is upward pressure on global prices as economies reopen and supply crunches continue. However, it expects those pressures to prove temporary, and it predicts inflation won't remain elevated for long.

The committee's members expect UK GDP growth to fall to 3% this quarter from an estimated 5% in the second quarter, and they predict GDP will rebound to pre-pandemic levels in the fourth quarter of this year. They also forecast that Consumer Price Index inflation will reach 4% in the fourth quarter of this year, well above their 2% target. UK inflation surged to 2.5% in June, the highest reading in almost three years.

The BOE policymakers said that "modest tightening" of monetary policy will likely be necessary to meet inflation targets in the medium term.

The pound ticked higher against the dollar after the announcement, but has been wavering lower and was at $1.3922 at last check.

This latest decision suggests the central bank's members are far more concerned with supporting the UK economy's recovery from the pandemic than tamping down inflation, at least for now. Surging demand for products such as lumber, used cars, and furniture, coupled with disruptions to supply chains, has driven the prices of several products to stratospheric levels in recent months.