The Bank of England decided to take a wait-and-see approach during its August monetary policy meeting and left its benchmark interest rate unchanged at a record low of 0.1% and the bond-buying programme at £875 billion as widely expected.
The central bank reiterated that it does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably. Some policymakers judge that, although considerable progress has been made in achieving the conditions of that guidance, the conditions are not yet met fully. The other members judge that the conditions of the guidance have been met fully, but note that the guidance made clear that these have only ever been necessary, not sufficient conditions for any future tightening in monetary policy.
Highlights:
- UK GDP expected to have risen by 5% in Q2
- UK GP expected to grow by around 3% in Q3
- UK GDP will reach pre-pandemic levels in Q4 2021
- Strength in global inflationary pressures expected to be transitory
- Inflation projected to fall back to close to the 2% target
- There is uncertainty about the impact of reducing the stock of purchased assets on monetary conditions
- Will judge it appropriate to begin reducing stock of purchased assets at a time when markets are functioning normally
- Should economy evolve broadly in line with central projections, some modest tightening of monetary policy over the forecast period is likely necessary
- When bank rate has risen to 0.50%, and if appropriate given economic circumstances, BOE intends to reduce stock of purchased assets
- Some modest tightening of monetary policy is likely to be necessary to be consistent with meeting inflation target in medium-term
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GBPUSD - Initially currency pair fell after however buyers manage to quickly regain control and price is testing the upper limit of the descending channel. Source: xStation5
