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Financial News: BoE Keeps Rates, QE Unchanged; Lowers Growth Outlook

BoE Keeps Rates, QE Unchanged; Lowers Growth Outlook

08/01/2019 - 07:28:00 (RTTNews)

(RTTNews) - The Bank of England left its key interest rates unchanged as widely expected and downgraded its growth projections.

The nine-member Monetary Policy Committee, led by Governor Mark Carney, unanimously voted to retain the bank rate at 0.75 percent, in line with economists' expectations.

The previous change in the bank rate was a quarter-point hike in August 2018 and the rate is now at its highest level since 2009.

The stock of corporate bond purchases was kept at GBP 10 billion and that of government bond purchases at GBP 435 billion.

Increased uncertainty about the nature of Brexit means that the economy could follow a wide range of paths over coming years, the bank noted. "The appropriate path of monetary policy will depend on the balance of the effects of Brexit on demand, supply and the exchange rate."

The BoE reiterated that the response to Brexit, whatever form it takes, will not be automatic and could be in either direction. According to Inflation Report, growth is expected to remain subdued in coming quarters, as uncertainties have intensified over the past few months.

However, the MPC's forecast is based on the assumption of a smooth Brexit. GDP is expected to have been flat in the second quarter of 2019. The bank lowered growth projections for both 2019 and 2020 to 1.3 percent.

Inflation is forecast to fall temporarily below the target over the next six months as energy prices decline. Inflation picks up to materially above the 2 percent by the end of the forecast period, the bank said.

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