Central Banks

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The Bank of England voted 9 to 0 to maintain Base Rate at 0.75%. The asset purchase target of £435 billion with a corporate bond target £10 billion for bond purchases was voted unaminous. Brexit uncertainty overhangs forecasts

BoECarney

Highlights:

Bank of England announces 1 August 2019 monetary policy decision

  • Unchanged at prior 0.75%
  • Official bank rate votes 0-0-9 vs 0-0-9 expected
  • Asset purchase target £435 bn vs £435 bn expected
  • Corporate bond target £10 bn vs £10 bn expected

Statement Breakdown

  • Detailed projections do not include a no-deal Brexit possibility
  • Continues to assume a smooth Brexit scenario In such an outcome, it would mean gradual rate hikes
  • Gradual and limited tightening remains appropriate
  • Monetary policy response to whatever form Brexit takes will not be automatic
  • Rates could go in either direction
  • Weaker short-term growth outlook reflects more entrenched Brexit uncertainty
  • Labour market no longer appears to be tightening but pay growth is stabilising
  • Estimates GDP growth of 0.0% q/q in Q2 2019
  • Sees GDP growth of +0.3% q/q in Q3 2019
  • Sees 2019 GDP of +1.3% (previously +1.5%)
  • Sees 2020 GDP of +1.3% (previously +1.6%)
  • Sees 2021 GDP of +2.3% (previously +2.1%)
  • Inflation seen at 1.90% in one year's time (previously 1.72%)
  • Inflation seen at 2.23% in two years' time (previously 2.05%)
  • Inflation seen at 2.37% in three years' time (previously 2.16%)

Source: Bank of England

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