Bank of England Leaves Bank Rate at 0.5 Percent

Bank of England’s Monetary Policy Committee (MPC) leaves the bank rate at 0.5 percent, citing the need to meet the 2 percent inflation target in a way that helps sustain economic growth and create jobs.

The MPC voted by a majority of 8-1 to maintain the same rate and voted unanimously to continue the stock of purchased assets financed by the apex bank reserves at £375 billion.

According to the statement released by the apex bank, since the twelve-month CPI inflation recorded in August was zero, which was well below the 2 percent target, it is important the MPC set monetary policy so as to ensure growth is enough to absorb underutilized resources that will enhance domestic growth and ensure inflation return to 2 percent target within two years.

The decision reflects unusual low contributions from energy, imported goods prices and past weakness of domestic cost growth. Though, core inflation remains subdued at around 1 percent, caused by poor labour cost and muted import cost growth, “itself partly reflecting the continuing dampening influence of sterling’s appreciation since mid-2013″, said the apex bank.

However, factory production surged in September by 0.5 percent, indicating production is picking up since it’s directly proportional to the economic health and correlates with consumer situations – employments and earnings.  Hence, a certain part of the manufacturing sector has picked up but yet to attain full capacity, therefore, low energy prices and global economic slowdown still hurting the British economy.

GBPUSD declined from 1.53712 to 1.52697 after gaining 0.5 percent yesterday.