Bank of England Released Detailed Summary of This Week’s MPC Policy Meeting

August 6, 2015

By a vote of 8-1 with Ian McCafferty preferring a rate hike, the Monetary Policy Committee kept its 0.50% interest rate and GBP 375 billion asset purchase program limit.  “given the likely persistence of the headwinds weighing on the economy, when Bank Rate does begin to rise, it is expected to do so more gradually and to a lower level than in recent cycles.  This guidance is an expectation, not a promise.”  Most likely the start of this process will be in 2016, later than the onset of Fed tightening.  CPI inflation is now at zero.  1.5 percentage points of inflation have been subtracted by lower food and energy costs as well as depressed imported prices due to sterling appreciation.  “The near-term outlook for inflation is muted.  The falls in energy prices of the past few months will continue to bear down on inflation at least until the middle of next year.  Nonetheless, a range of measures suggest that medium-term inflation expectations remain well anchored.  There is little evidence in wage settlements or spending patterns of any deflationary mindset among businesses and households.”  The full full statement can be read here.  Additional insight into the committee’s latest thinking is contained in the August Inflation Report.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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