Summary Of BOE Monetary Policy Meeting

Summary Of BOE
Monetary Policy Meeting

The Bank of
England (BOE) held its monetary policy meeting on Thursday, while releasing its
latest policy statement. The BOE kept the interest rates unchanged at 0.10%,
while reviewing a range of actions to deliver its objectives. The central bank
is not considering to tighten its monetary policy until its 2% inflation target
is achieved.  

According to the
statement, the BOE current challenge is responding to the Covid-19 pandemic’s
impact economically and financially. The central bank also voted to continue
with the current assets purchases of £745 billion, while agreeing to adjust its
policy in an effort to support the country’s economic recovery. 

Commenting on
the economic outlook, the BOE mentioned that outlook remains uncertain due to
the evolution of the pandemic and the Brexit trade agreement. The bank’s
projection is based on the assumption of a comprehensive free trade with the
European Union effective January 1 2021. Indicators of global activity are in
line with the bank’s expectations during its meeting in August, despite the
previous fall in the pound exchange rate amid Brexit concerns. 

UK GDP in July
was around 18.5% above its low in April, and 11.5% below the levels in Q4 2019.
Economic data indicated a stronger than expected recovery in overall
consumption, where levels now returning to the an aggregate since the start of
the year. The BOE also expects GDP to stay 7% below its level for Q4 2019, less
weaker than its expectations in August. However, investments remained weak,
while uncertainties among businesses and the labor market remain high.

Overall CPI
inflation level fell from 1.0% in July to 0.2% in August, where the bank
expects it to stay below 1% until early 2021, although higher than the
expectations from August meeting. The UK’s inflation and growth remains highly
dependent on the pandemic’s evolution and government measures taken to bolster
the impact. Households, businesses, and financial markets are also crucial
factors, together with Brexit negotiations’ outcome. 

Recent economic
data from the region also showed better than expected compared to expectations
in August, although lingering risks continues to cloud the bank’s view of
future economic performance. The recent resurgence of Covid-19 infections
across the world, including the country itself, poses a threat of further
economic activity damage, although less severe than the outbreak in March.

Conclusively,
the BOE will continue to monitor the situation closely while remaining ready to
adjust its monetary policy if needed. The BOE will also look into other
suitable actions, including negative rates adoption if needed, to achieve its
objectives. One main focus aside from the pandemic’s condition is the upcoming
outcome from Brexit talks, where PM Boris Johnson had brought forward the
deadline to reach an agreement with the EU to October 15.

Photo Credit: www.garybarker.co.uk