Money in United Kingdom
United Kingdom - Money
BoE leaves rates unchanged in December, downgrades Q4 growth forecast
At its meeting ending on 19 December, the Monetary Policy Committee (MPC) of the Bank of England (BoE) voted unanimously to keep the Bank Rate unchanged at 0.75%. The Bank was also in full agreement to maintain the stock of investment-grade corporate bond purchases at GBP 10 billion and to maintain the total stock of UK government bond purchases at GBP 435 billion, financed by the issuance of Central Bank reserves. All decisions were in line with market expectations.
The decision to stay put in December came despite intensifying wage pressures and slightly above-target inflation, which in other circumstances could have encouraged the Bank to raise rates. However, Brexit uncertainty is now weighing increasingly on the economy, with banks’ funding costs and corporates’ bond spreads rising, business investment likely weak and the all-important services sector losing steam, as evidenced by November’s PMI reading. As a result, the BoE downgraded its growth forecast for Q4 from 0.3% to 0.2%. Any rate hike in December would have risked further dampening already-fragile economic activity.
In its communiqué, the BoE adopted a more hesitant stance, and placed greater emphasis on the impact that Brexit is having—and could have over the coming months—on the economy. That said, the Bank still reiterated its guidance that interest rates are expected to rise gradually and to a limited extent going forward, to temper increasing domestic cost pressures. This guidance is based on the assumption of a smooth adjustment to the future trading relationship with the EU; if the UK leaves the EU without a deal in place, rates could stay put or even be cut to support the economy.
UK Interest Rate Forecast
Our panelists expect the Bank Rate to end 2019 at 1.07% and 2020 at 1.37%.
United Kingdom - Money Data
|Money (annual variation in %)||5.4||6.2||5.9||3.1||3.1|
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||1.31||-3.04 %||Jan 16|
|Exchange Rate||1.29||-0.35 %||Jan 16|
|Stock Market||6,863||-0.26 %||Jan 16|
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January 16, 2019
Consumer prices rose 0.2% in December over the previous month, matching November’s figure.
January 11, 2019
Industrial production decreased 0.4% in November over the prior month according to the Office for National Statistics, down from October’s revised 0.5% fall (previously reported: -0.6% month-on-month).
January 11, 2019
According to monthly GDP data released by the Office for National Statistics (ONS), economic activity rose 0.2% in November over the prior month in seasonally-adjusted terms, up from October’s 0.1% increase.
United Kingdom: Services growth limp in December, manufacturers increase stocks as Brexit uncertainty rises
January 4, 2019
The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) ticked up slightly from 50.4 in November to 51.2 in December, overshooting analysts’ expectations.
January 4, 2019
According to the Nationwide Building Society (NBS), house prices in the United Kingdom decreased 0.7% in December compared to the previous month in seasonally adjusted terms, contrasting November’s 0.4% uptick.