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.

  1. A Bank Rate of 0.25%, which had been halved in August.
  2. A mandate to purchase an additional 60 billion pounds of British gilts on top of the GBP 375 billion it earlier had acquired.
  3. 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.

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