Bank of England

February 5, 2015

Another monthly policy meeting of the Monetary Policy Committee came and went without a change.  The Bank rate has been at 0.5% since March 2009.  Quantitative stimulus commenced at the time, but the last hike in the size of the asset purchase program was announced in July 2012, and the GBP 375 billion limit on such holdings was reached four months later.  The statements released on meeting days customarily contain no useful information.  Minutes of this month’s meeting will be released on the 18th of February, but markets will learn about the latest thinking of policymakers even sooner when the quarterly Inflation Report is published next Thursday.  The prior report projected sub-target inflation, that is less than 2.0%, through end-2016, and since then markets have assumed that Fed tightening will precede the Bank of England’s first interest rate hike by a considerable duration.  Since November, the near-term inflation outlook as become even lower because of plunging energy costs.  The central bank view on inflation in 2016 is more pertinent regarding the first rate hike, however.  British growth slowed to 0.5% last quarter, but recent indicators such as the PMI’s released this week and today’s Halifax house price index suggest some new forward momentum may be coming on stream.

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



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