United Kingdom Monetary Policy

United Kingdom

United Kingdom: BoE keeps rates unchanged, minutes show some policy makers edging towards hike

July 22, 2015

At its 8 July meeting, the Monetary Policy Committee (MPC) of the Bank of England (BoE) decided to keep the Bank Rate unchanged at 0.50% and to leave the stock of asset purchasing at GBP 375 billion, as the markets had expected. The MPC made both decisions unanimously. The BoE continues to see the rate as appropriate considering the inflation outlook as well as the current state of the economy.

In its analysis of domestic conditions, the BoE noted that the final GDP breakdown released by the ONS (which sets GDP at 0.4%, a notch above the 0.3% of the two initial estimates) puts national accounts figures more in line with evidence from business surveys, in particular as it signals stronger investment activity. Going forward, the BoE sees a continuation of the positive momentum in the second quarter. Regarding the labor market, data suggest a weakening in employment demand and therefore greater slack in the economy than expected. In commenting on the summer budget, the BoE suggests that the new measures that were approved should not have a different impact on growth and prices compared to what was suggested by the March budget, but further analysis will be done for next month’s policy decision

In June, consumer prices were flat over the same month of the previous year, inching down from May’s 0.1% increase. Regarding price developments in the medium term, the MPC’s view is that inflation will pick up notably toward the end of the year.

Overall, apart from the usual considerations regarding real and monetary developments, uncertainty in the financial markets due to the developments in China and Greece weighed on the unanimous decision to keep rates unchanged this month: were the situation in Greece not a factor, a number of policy makers might have balanced towards a rate hike.

FocusEconomics Consensus Forecast panelists expect the Bank Rate to end the year at 1.09%. For 2016, the panel expects the Bank Rate to end the year at 1.66%.


Author:, Senior Economist

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United Kingdom Monetary Policy July 2015

Note: Asset Purchase Facility (APF) in GBP billion and Bank Rate in %.
Source: Bank of England (BoE).


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