Bank of England Leaves Policy Settings Unchanged

September 13, 2018

A second Bank Rate hike of 25 basis points to 0.75% had been undertaken six weeks ago. The first being of similar size was made last November. The asset purchase program was not changed either, and current limits were reached quite some time ago. Members of the Monetary Policy Committee decided that the current stance remains appropriate by a unanimous 9-0 vote. In a released statement, two growth risks were mentioned:

 Recent announcements of further protectionist measures by the United States and China, if implemented, could have a somewhat more negative impact on global growth than was anticipated at the time of the August Report.

The MPC continues to recognize that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal.  Since the Committee’s previous meeting, there have been indications, most prominently in financial markets, of greater uncertainty about future developments in the withdrawal process.

That said, officials expect growth averaging 1.75% per year over the forecasting time horizon to slightly exceed supply growth. Pay inflation has picked up slightly, and CPI inflation of 2.5% is not expected to settle back to the 2.0% medium term target until the final forecast year. The main policy message to markets and the public remains that if economic trends proceed along the lines of the baseline forecast, gradual yet limited additional interest rate hikes are likely.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




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