United Kingdom: Bank of England maintains monetary policy stance
March 23, 2011
At its latest monetary policy meeting held on 9-10 March, the Bank of England (BoE) left its monetary policy unchanged, in a decision widely expected by the market. As a result, the Bank Rate remains at 0.50% and the size of the asset purchase programme (quantitative easing) at GBP 200 billion. As inflation accelerates further above the Bank's 3.0% target, market analysts are focusing their attention on the BoE Monetary Policy Committee (MPC), in an attempt to anticipate their timing for the next interest rate hike. As was the case in the previous meeting, three out of the nine members of the MPC voted to tighten monetary policy, with the most hawkish being Andrew Stance, who recommended a 50-basis-point increase. In contrast, six members, including BoE governor Mervin King, voted to maintain the current stance. That said, even the MPC most dovish member, Adam Posen, who maintained the vote on further increasing the asset purchase programme by GBP 50 billion, acknowledged that risks to inflation exist. In fact, the BoE warned that there is significant risk that inflation will exceed 5.0% in the near term. The next MPC meeting will be held on 6-7 April.