United Kingdom: BoE keeps the Bank Rate on hold in March
March 17, 2016
At its 17 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. The decision met market expectations. As in the previous month, the Committee voted unanimously on the proposals of keeping both the Bank Rate and the stock of asset purchasing unchanged. For six consecutive meetings prior to January’s meeting, the same member of the nine-member Committee continuously voted in favor of increasing the Bank Rate by 25 basis points. Conversely, the other members saw the current rate as appropriate considering the state of the economy as well as the inflation outlook.
In its analysis of domestic conditions, the BoE commented that the British economy grew 0.5% in the final quarter of last year and recent economic data suggest a similar expansion in the first quarter of this year. In January, retail sales increased and activity in the housing market improved. Nevertheless, the Bank acknowledged that a measure of economic uncertainty had decreased? for the first time in three years, broadly reflecting uncertainty related to the country’s membership in the European Union. Doubts regarding the outcome of the EU membership referendum have also weighed on the currency and the sterling has depreciated slightly since February’s meeting.
Regarding price developments, the MPC commented that the inflation outlook has not changed much since February’s meeting. Inflation remains well below the Bank’s 2.0% target due to low commodity prices and the relatively-strong currency. As a result, the outlook for the medium term largely depends of the evolution of the factors. The Bank is of the opinion that, “inflation would continue along a gentle upward path, reaching the 2% target in around two years’ time.”
Author: Dirina Mançellari, Senior Economist