Bank of England Unanimously Keeps Policy Unchanged
November 3, 2016
The Monetary Policy Committee decided to make no changes to the three elements of its accommodative stance.
- A Bank Rate of 0.25%, which had been halved in August.
- A mandate to purchase an additional 60 billion pounds of British gilts on top of the GBP 375 billion it earlier had acquired.
- Plans to buy GBP 10 billion corporate bonds.
Providing no additional stimulus this month is a deviation from the message conveyed back in August. A statement from the MPC notes that growth since then has turned out better than assumed, while the inflation outlook has darkened in light of a renewed slide in the pound. The central bank’s quarterly Inflation Report was also released. The temptation to counter the likelihood now of inflation rising above the 2% target to around 2.75% in 2018 was rejected. The baseline forecast presumes it will settle back to 2.5% in 2019 and the target of 2.0% sometime in 2020. A more restrictive policy now would punish growth unduly at a time when such could prove vulnerable. At the same time, the statement warns that that the balance between weak growth and higher inflation will be constantly reassessed because there are ” limits to the extent to which above-target inflation can be tolerated.”
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England