Bank of England to maintain Bank Rate at 0.1%

The Bank of England’s (BoE) Monetary Policy Committee (MPC) has vote unanimously to maintain Bank Rate at 0.1%, on Thursday.

At its latest meeting, the MPC said it “does not intend to tighten monetary policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably”.

The Committee noted that the outlook for the economy remains “unusually uncertain”, noting that health concerns are continuing to drag on activity and the unemployment rate is projected to rise markedly.

Twelve-month CPI inflation fell from 1.0% in July to 0.2% in August, consistent with temporary impacts on inflation from the Government’s Eat Out to Help Out scheme and the cut in VAT for hospitality, holiday accommodation and attractions. CPI inflation is expected to remain below 1% until early 2021.

In its minutes, the MPC said, “The path of growth and inflation will depend on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom. It will also depend on the responses of households, businesses and financial markets to these developments.”

Frances Haque, chief economist at Santander added, “The MPC’s decision to leave Bank Rate unchanged at 0.1% was expected this month, along with the decision to keep the amount of quantitative easing undertaken by the Bank of England unchanged.

“However, although the economy has started to recover, there remains uncertainty caused by the ongoing issues around trade negotiations with the EU as well as the possibility of more stringent measures being imposed if Covid-19 cases start to increase rapidly. As a result, there continues to be a significant possibility of further rate cuts and more quantitative easing to help support the economy as we move through the tail end of 2020.”