United Kingdom: Bank of England keeps rates on hold
August 17, 2011
At its monetary policy meeting on 4 August, the Bank of England (BoE) maintained the Bank rate at 0.50% and left the asset purchase facility (quantitative easing) unchanged at GBP 200 billion. The decision was broadly anticipated by the market, as economic growth is weak (Q2 2011: +0.2% quarter-on-quarter) and inflation remains above the Central Bank's target. All nine members of the Monetary Policy Committee (MPC) voted to keep rates on hold at 0.50%, the first unanimous decision since May 2010. In addition, one member voted for an additional monetary stimulus, by increasing the asset purchase programme to a total of GBP 250 billion. The next MPC meeting will be held on 7-8 September. The BoE continues to face the dilemma of reining in high inflation without derailing the still fragile economic recovery. For the time being, monetary authorities are likely to maintain the policy stimulus, with a majority of Consensus Forecast panellists expecting the BoE to stay put in the third quarter.