Results of the Bank of England's meeting

The Bank of England left its monetary policy unchanged. The Monetary Policy Committee (MPC) voted unanimously to maintain Bank Rate at 0.25%. The Committee also voted unanimously to continue with the program of 60 billion pounds of UK government bond purchases to take the total stock of these purchases to £35 billion pounds, financed by the issuance of central bank reserves (QE).

The most important thing is that the BoE acknowledged that since the August Inflation Report indicators of activity and business sentiment have recovered from their minimums, so that the near-term outlook for activity is stronger than it was seen 3 months ago.

The updated MPC economic projections are listed in the November Inflation Report. Lower exchange rate of the British pound made the central bank to raise CPI inflation forecast. Inflation is now expected at 2.72% in a year versus 2.0% estimate made in August. Growth forecasts show stronger short-term growth outlook but weaker recovery in medium term and overall lower output. According to the regulator, the impact of lower pound on inflation will be temporary – it will be too costly to offset this impact by raising rates.

GBP/USD rose and is approaching 1.2500.

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