Money in United Kingdom
United Kingdom - Money
BoE leaves monetary policy unchanged in August, adopts slightly more optimistic tone
At its meeting ending on 4 August, the Bank of England (BoE) left the policy rate at a record low of 0.10%. 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 improved performance recently as lockdown restrictions were eased: retail sales bounced back in May and June, while the composite PMI surged in July. This meant that further monetary stimulus was not warranted. Also in August, the BoE released updated economic forecasts. The Bank now sees GDP contracting 9.5% this year (May forecast: -14.0%) before a 9.0% rebound next year, with inflation dipping to 0.3% in the fourth quarter of this year and rising to 1.8% in Q4 2021.
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”. Given inflation is seen remaining below target this year and next, this suggests rates will stay low for a prolonged period, as most panelists expect. That said, the outlook is unusually uncertain, and developments regarding Covid-19 or Brexit could see the Bank change its stance. The BoE also discussed the possibility of negative rates, and kept this policy option under review.
On the possibility of negative rates, analysts at ING commented: “Barring a deterioration of the outlook, we find the risk-reward of positioning for even lower policy rates poor.” Analysts at Nomura adopted a similar tone: “There seems little appetite among the MPC to lower Bank Rate below zero.”
Our panelists see the Bank Rate ending 2020 at 0.09% and 2021 at 0.08%.
United Kingdom - Money Data
|Money (annual variation in %)||5.9||3.1||3.1||3.8||3.9|
5 years of economic forecasts for more than 30 economic indicators.
United Kingdom Money 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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September 16, 2020
Consumer prices fell a seasonally-adjusted 0.42% over the previous month in August, contrasting the 0.45% rise recorded in July.
September 15, 2020
According to the ONS, in May–July, the unemployment rate ticked up to 4.1%, while redundancies rose at the sharpest rate since 2009, increasing by 58.000 compared to the same period last year.
September 11, 2020
GDP rose 6.6% month-on-month in seasonally-adjusted terms in July, which followed June's 8.7% increase.
September 11, 2020
Industrial production grew 5.2% month-on-month in seasonally-adjusted terms in July (June: +9.3% mom).
September 2, 2020
According to the Nationwide Building Society (NBS), house prices in the United Kingdom rose 2.0% month-on-month in August, up from July’s 1.8% rise.