United Kingdom Monetary Policy

United Kingdom

BoE stays put amid divided vote

At its 3-4 April policy monetary policy meeting, the Bank of England (BoE) maintained both the Bank Rate at 0.50% and the size of its asset purchase programme at a total of GBP 375 billion.

According to the minutes, the Monetary Policy Committee's (MPC) voted unanimously in favour of keeping the Bank Rate unchanged at 0.50%. Regarding the stock of asset purchases, six out of the nine members that compose the MPC voted in favour of maintaining it at its current size, while Governor Mervyn King and other two MPC members favoured an increase of GBP 25 billion to a total of GBP 400 billion. The next monetary policy meeting is scheduled for 8-9 May.

All FocusEconomics Consensus Forecast panellists anticipate the BoE to leave interest rates unchanged at 0.50%. For next year, a majority of panellists expect the Bank will also stay put, resulting in a year-end projection of 0.56%.

Meanwhile, on 24 April, the BoE announced a one year extension of its Funding for Lending Scheme (FLS), which will now be available until the end of January 2015. The Bank also announced changes to the programme, namely higher incentives to boost lending to small and medium sized enterprises as well as the inclusion of some non-bank lenders, such as financial leasing corporations and factoring corporations. The FLS, which was launched in July 2012, is aimed at improving credit conditions for households and businesses. While the programme has so far successfully reduced borrowing costs, its effect on the availability of credit to the private sector has been modest, with data from the BoE showing that lending to businesses contracted an annual 4.4% in the three months up to February.


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United Kingdom Monetary Policy Chart

United Kingdom Monetary Policy April 2013

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

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