The MPC’s central projection in the May Report , under the assumptions that Bank Rate followed a path implied by market interest rates, that the stock of purchased assets remained at Β£375 billion and of continued UK membership of the European Union (EU), was that GDP growth was likely to dip further in the near term, reflecting a period of uncertainty around the referendum, before picking up to 2ΒΌ% as that drag waned. CPI inflation was projected to pick up over the next year or so, returning to the 2% target by mid-2018 and rising slightly above it thereafter.

[On 15th June] All Committee members considered the current stance of monetary policy to be appropriate. The MPC noted, however, that a vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy.

At its meeting ending on 14 July, the MPC considered the early evidence on the impact of the vote to leave the EU and the implications this had for monetary policy, in light of the actions already taken by the Financial Policy Committee, the Prudential Regulation Authority and the Bank. There had been a sharp reaction in financial markets. Sterling had fallen markedly against the dollar and, although the FTSE All-Share index had risen over the same period, the equity prices of UK-focused banks and other companies exposed to the domestic property sector had fallen. Short-term and longer-term interest rates had declined internationally and there had been falls in the prices of euro-area risky assets. Official data on economic activity covering the period since the referendum were not yet available. Indicators of uncertainty among households and companies had risen further and early indications from surveys suggested that some businesses were beginning to delay investment projects and postpone recruitment. Regarding the housing market, the latest RICS survey had pointed to a significant weakening in expected activity. This evidence suggested the uncertainty stemming from the referendum result was likely to depress economic activity in the near term.

The sharp fall in the exchange rate would, in the short run, put upward pressure on inflation. In the longer run, the path for inflation would also depend crucially on how inflation expectations responded. Financial market measures of near-term inflation expectations had risen moderately following the referendum, although only to around historical averages and longer-term inflation expectations had fallen. To that end, most members of the Committee expected monetary policy to be loosened in August.