United Kingdom: BoE keeps the Bank Rate on hold at 0.50%
March 5, 2015
At its 4–5 March 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.
The Committee commented that the economic news since the last monetary policy meeting has been “fairly modest”. The economic outlook described in February’s Inflation Report remains valid as domestic activity has expanded at a sustainable pace. In addition, the labor market has continued to tighten, causing nominal wage growth to rise. The Bank added that the unemployment rate fell from 6.0% in the third quarter to 5.7% in the fourth quarter and that the confidence in the job market increased as the rate at which the employees move from one job to another picked up. However, there is still uncertainty regarding the remaining slack in the economy. The issue remains a matter of debate among the Committee members.
Regarding price developments, BoE said that CPI inflation fell as expected, mainly reflecting lower food and energy prices. As a result, inflation is well below the Bank’s target of 2.0%, which means that it is more likely than not that inflation will drop below zero at some point in the coming months. Looking forward, the Committee added that, “the combination of the increase in the price of oil and appreciation of sterling that had occurred over the month was expected to leave the path of inflation broadly unchanged in the near term, but a little lower further ahead.”
Author: Dirina Mançellari, Senior Economist