Bank of England Enacts No Policy Changes this Time

September 15, 2016

The third Post-Brexit meeting of the Monetary Policy Committee has been held. The one in July made no immediate changes, adopting a wait and see approach instead. In August, three kinds of stimulus were unveiled: a halving of the Bank Rate to 0.25%, a GBP 60 billion expansion of the government security purchase plan to GBP 435 billion, and a program of corporate bond purchases totaling GBP 10 billion. September’s meeting did not augment monetary stimulus further but released a statement that concludes,

The Committee will assess that news[recent indicators of greater-than-expected strength], along with other forthcoming indicators, during its November forecast round. If, in light of that full updated assessment, the outlook at that time is judged to be broadly consistent with the August Inflation Report projections, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of this year.  The MPC currently judges this bound to be close to, but a little above, zero.

Governor Carney made controversial predictions prior to the Brexit vote on June 23 that a British decision to leave the EU could create an ensuing recession and would have profoundly negative implications for growth and positive ones for lifting inflation. Today’s statement concedes that the immediate economic trends have involved higher growth and more contained inflation that feared. But the stress is upon the fact that these are still early days for assessing the repercussions of Brexit. Indeed, the details of the exit have not yet been negotiated. It’s too early to tell how Britain’s trends will be affected in the all-important long term.

In 2017, the MPC is adopting a schedule of eight meetings per year instead of the current format of one meeting each month. A schedule of meetings in 2017 and 2018 was published today.

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



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