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Financial News: BoE Policymakers Split On Rates

BoE Policymakers Split On Rates

12/19/2019 - 07:58:00 (RTTNews)

(RTTNews) - The Bank of England left its interest rate unchanged on Thursday but two members called for a rate cut citing weaker economic growth and rising spare capacity. At the Monetary Policy Committee meeting, Governor Mark Carney and six other members voted to maintain the interest rate at 0.75 percent. Meanwhile, Jonathan Haskel and Michael Saunders sought a quarter point reduction for the second straight meeting.

The committee unanimously decided to retain the stock of corporate bond purchases at GBP 10 billion and government bond purchases at GBP 435 billion.

The MPC judged that the existing stance of monetary policy is appropriate.

Despite two committee members voting for a rate cut, James Smith, an ING economist said it would take a sharper deterioration in the jobs market for the Bank to act.

The Conservative Party's majority at the general election will help the UK to pass the Withdrawal Bill in the parliament and move ahead with Brexit. "It was possible that household and business sentiment could pick up in the near term," the bank said in the minutes.

"Further out, the responses of companies and households would depend on developments in the next stage of the Brexit process, including negotiations about the nature of, and the transition to, the United Kingdom's future trading relationships."

Monetary policy could respond in either direction to changes in the economic outlook in order to ensure a sustainable return of inflation to the 2 percent target, the bank said.

Further ahead, policymakers said some modest tightening of policy, at a gradual pace and to a limited extent, may be needed to maintain inflation sustainably at the 2 percent target.

The bank staff downgraded its growth projection for the fourth quarter to 0.1 percent from 0.2 percent.

The headline rate is still expected to fall to around 1.25 percent by the spring, owing to the temporary effects of falls in regulated energy and water prices.

Last week, the US Federal Reserve had left its key interest rates unchanged after three straight cuts and the European Central Bank retained its policy at the first policy session chaired by the new chief Christine Lagarde.

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