london skyline

United Kingdom Monetary Policy March 2021

United Kingdom: BoE keeps rates and asset purchases unchanged in March; strikes more upbeat tone

At its meeting ending on 17 March, the Bank of England (BoE) maintained the bank rate at a record low of 0.10%, where it has remained since March 2020. Moreover, the Bank agreed to keep the total stock of investment-grade corporate bonds and UK government bonds at GBP 895 billion.

The Bank highlighted that both external and domestic economic conditions had been stronger than anticipated, and mentioned that the additional fiscal stimulus in the 2021 budget and the rapid pace of domestic vaccinations bode well for the domestic outlook. Moreover, the Bank seemed sanguine on the recent rise in bond yields, despite this potentially leading to a tightening of financial conditions, seeing higher yields as a sign of improved economic dynamics. As such, further monetary easing was not required. On the other hand, with inflation still substantially below target and the UK subject to hefty Covid-19 restrictions, the Bank considered it premature to begin reducing monetary stimulus.

In its communiqué, the Bank reiterated the previous meeting’s forward guidance that it “stands ready to take whatever additional action is necessary to achieve its remit” of 2% inflation. While this implies further easing is possible, it will likely not be necessary given the economy is on the mend and inflation is expected to move swiftly back towards the target in the coming quarters. Indeed, almost all panelists see rates unchanged through the end of the year. The next meeting ends on 6 May.

According to analysts at ING:

“The Bank of England has signalled it remains relaxed about the recent rise in gilt yields and rate hike expectations. That tells us we’re unlikely to get negative rates in 2021 and instead there will be a growing focus on tightening, though this process is unlikely to start before 2023.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest