Bank Of England Keeps Rate, QE Unchanged As Expected, Hints May Cut More


As was expected by the consensus of economists, and facilitated by the recent surge of positive economic data out of the UK, moments ago the BOE did not surprise, when it kept its interest rate at 0.25% after a unanimous 9-0 vote, which also included keeping the BOE’s government bond and corporate bond purchases unchanged at GBP 435 and 10bn, respectively.

However, while the nine-member Monetary Policy Committee admitted that recent near-term data has been far stronger than anticipated since the Brexit vote, and certainly by comparison to the BOE’s apocalyptic vision, it couldn’t draw inferences for its longer-term forecasts. Officials said their view of the “contours of the economic outlook” hadn’t changed.

In its analysis, the MPC said if the outlook in November is “broadly consistent” with the projections published last month when it announced a new stimulus package, “a majority of members expected to support a further cut in bank rate to its effective lower bound” later this year. The committee sees that lower limit at close to, but just above, zero.

Summarising the statement:

  • BOE says MPC majority expect another rate cut this year if economy is broadly consistent with their August projections
  • Kristin Forbes, Ian McCafferty say current outlook don’t warrant additional gilt purchases; Forbes says argument also applies to corp. bond purchases
  • BOE says initial impact of August stimulus is encouraging
  • BOE says some near-term indicators better than expected; 2H GDP growth may slow less than forecast in August
  • BOE says MPC view of “contours of economic outlook” are unchanged
  • BOE says policymakers will assess recent news at November forecast round  
  • BOE sees inflation reaching 2% target in 1H 2017
  • The full statement by the BOE:

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