Interest Rate in United Kingdom
United Kingdom - Interest Rate
BoE stands pat in September, opens door to negative rates in near future
At its meeting ending on 16 September, the Bank of England (BoE) maintained the policy rate at a record low of 0.10%, where it has remained since March’s combined 65 basis points of cuts. Moreover, the Bank kept its asset purchasing program unchanged, leaving the target for the total stock of investment-grade corporate bonds and UK government bonds at GBP 745 billion.
The Bank’s decision was underpinned by the economy’s continued improvement in recent months as lockdown restrictions were eased: Retail sales bounced back in May–July, while the composite PMI surged in July–August. This meant that further monetary stimulus was not warranted.
In its communiqué, the Bank stated it “does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably”. Amid an unusually uncertain outlook, the Bank noted that it is exploring “how a negative Bank Rate could be implemented effectively, should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates“.On the possibility of negative rates, Kallum Pickering, senior economist at Berenberg, commented:
“While the BoE is clearly exploring the possibility of using negative rates as a potential tool, we doubt that the bank will go down that path anytime soon – at any rate, not in November.”
Analysts at Nomura adopted a similar tone:
“We remain circumspect about how helpful further rate cuts into negative territory would be. [However], negative rates have worked elsewhere and they could yet be used as one of a package of measures, including more QE, early next year – if needed.”
The next monetary policy meeting is scheduled for 5 November.
Our panelists see the Bank Rate ending 2020 at 0.09% and 2021 at 0.08%.
United Kingdom - Interest Rate Data
|Policy Interest Rate (%)||0.50||0.25||0.50||0.75||0.75|
5 years of economic forecasts for more than 30 economic indicators.
United Kingdom Interest Rate Chart
Source: Bank of England (BoE).
United Kingdom Facts
|Bond Yield||0.83||-3.04 %||Jan 01|
|Exchange Rate||1.33||-0.35 %||Jan 01|
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October 21, 2020
Consumer prices rose a seasonally-adjusted 0.41% in September over the previous month, contrasting the 0.42% fall logged in August.
October 13, 2020
According to the ONS, in June–August the unemployment rate ticked up to 4.5%—an over three-year high—while redundancies rose at a record pace in quarter-on-quarter terms.
October 9, 2020
Industrial production increased 0.3% on a calendar-adjusted month-on-month basis in August (July: +5.2% mom).
October 9, 2020
GDP expanded 2.1% on a calendar-adjusted month-on-month basis in August (July: +6.4% mom), amid softer growth in industrial production, construction and services.
September 30, 2020
According to the Nationwide Building Society (NBS), house prices in the United Kingdom rose 0.9% month-on-month in September, down from August’s 2.0% rise.