United Kingdom Monetary Policy

United Kingdom

BoE keeps rates on hold amid fast fall in unemployment rate

At its 8-9 January meeting, the Bank of England (BoE) declared that it would keep the Bank Rate unchanged at 0.50% and leave the stock of asset purchasing at €375 billion. Both decisions, which the Monetary Policy Committee (MPC) made unanimously, were widely expected by the markets.

The MPC said that the economy is growing at a healthy rate, which is mainly due to household spending. With December's inflation falling at 2.0% in annual terms and thus reaching the Bank's target, "the likelihood of CPI inflation being above 2.5% at the 18- to 24-month period relevant to the MPC's 'knockouts' has been reduced." In addition, the Bank stated that the unemployment rate has been falling faster than expected. The latest data that were released on 22 January show that the joblessness rate fell to 7.1% in the three months up to November. As the rate is still above the 7.0% threshold, however, the Committee decided to keep the interest rate on hold.

FocusEconomics Consensus Forecast panelists expect the interest rate to be 0.58% by the end of 2014. In 2015, the panel expects a year-end Bank Rate of 1.06%.

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United Kingdom Monetary Policy Chart

United Kingdom Monetary Policy January 2014

Note: Bank rate in %.
Source: Bank of England (BoE).

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