Bank of England: No Change

April 14, 2016

In 2016, communication by the Monetary Policy Committee has changed but not the stance of policy.  Policymakers now release a detailed statement of explanation instead of the old system of deferring details except when changing the interest rate to published minutes, which used to be delayed by two weeks.

The Bank Rate of 0.5% since March 2009 was retained as expected, and no changes were made to the asset purchase program which hit its GBP 375 billion limit in late 2012.  The decision was 9-0 and explained in a statement released today. Officials observe subdued total and core inflation, predict a lessening drag on inflation from external factors and gradually increasing domestic costs, and assert that the outlook presented in the February quarterly Inflation Report remains broadly intact.  Growth is expected to be positive and steady, and the 2% inflation target is expected to be achieved within two years.  The statement expresses concern about the EU referendum set for June 23.  The implicit assumption is that voters will choose to remain in the European Union, but the uncertainty ahead of the decision poses challenges for the period ahead.  The impact of that uncertainty on policy is likely to make officials particularly cautious about rocking the boat.  The next two meetings are set for May 12 and June 16.

Referendum effects are likely to make macroeconomic and financial market indicators harder to interpret over the next few months, and the Committee is likely to react more cautiously to data news over this period than would normally be the case.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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