The Bank of England has cut its expectation for GDP growth after the cold snap - but still looks poised to hike interest rates later this spring.

Officials now forecast that the UK economy will have expanded by just 0.3% in the first quarter after the "Beast from the East" brought the country to a standstill - though they see the effect as "likely to be temporary".

The Bank's latest interest rate decision saw it leave the cost of borrowing on hold at 0.5% - though an unexpected split saw two policy makers break cover to call for an immediate hike.

Sterling briefly surged past $1.42 to reach a two-month high against the US dollar as the 7-2 vote on the Monetary Policy Committee (MPC) appeared to add to the likelihood that there will be a rise in rates as soon as May.

But the pound later settled back near its opening level at just above $1.41.


There was a further note of caution on the prospects for the world economy as officials warned Donald Trump's tariff plans risked escalating protectionist trade policies, causing a "signficant negative impact on global growth", though they judged that the direct impact of the policy was likely to be small.

The Bank had signalled last month that rates would need to rise sooner than previously thought.

Experts are divided on whether a move up to 0.75% will come in May or not until later in the year.

MPC members Ian McCafferty and Michael Saunders argued in the latest meeting that evidence of a pick-up in pay growth, risking higher inflation, meant now was the time for a hike.

Minutes of the Bank's meeting indicated that prospects for the economic outlook were broadly unchanged from its view in February, when it saw an improved path for wage prices putting upward pressure on inflation - though for most members, not so much that a rate rise was needed straight away.

Its view remained that "given the prospect of excess demand over the forecast period, an ongoing tightening of monetary policy over the forecast period would be appropriate" to return inflation towards its 2% target.

Officials shrugged off a downward revision to fourth quarter GDP figures though acknowledged snow disruption would have a "measurable adverse effect on growth in the first quarter".

Bank officials judged underlying GDP would grow by 0.4% in the first quarter, in line with its previous estimate.

But the minutes added: "After incorporating an initial judgment on the impact of the snow-related news, staff had revised down their estimate of headline GDP growth to 0.3%."

Paul Hollingsworth, senior UK economist at Capital Economics, said: "A rate hike in May is not set in stone.

"If the economy turns out much weaker than the MPC expects, wage growth falls back, or if the recent signs of US protectionism evolve into a full-blown trade war, then that might cause the MPC to remain on hold.

"But we think that a May hike is on the cards."