Bank of England Leaves Rate Unchanged

The Bank of England’s Monetary Policy Committee (MPC) left official bank rate unchanged.

At the meeting held on 14 September 2016, the MPC voted unanimously to maintain Bank Rate at 0.25 percent and to continue with the programme of £60 billion of UK government bond purchases, which will take the total stock of these purchases to £435 billion.

The committee noted that while August stimulus expansion led to a greater than anticipated boost in UK asset prices, the committee will monitor closely changes asset prices and interest rates facing households and businesses and their impact on economic activity.

On the issue of growth, the MPC said some part of the economy would be more sensitive than others to heightened uncertainty, but business and housing investment were expected to decline in the second half of 2016. While consumption growth was expected to slow more gradually, alongside households’ real disposable incomes.  While most business investment intentions surveys have weakened further since the August Inflation Report, the near-term outlook for the housing market is less negative than expected and the indicators of consumption have been a little stronger than expected.

The committee expects inflation to rise to around its 2 percent target in the first half of 2017 — consistent with the August inflation outlook report. Although, twelve-month CPI inflation remained at 0.6 percent in August, the committee blamed it on the unusual drags in energy and food prices.

Overall, the data remain consistent with the August outlook “that investment from businesses will slow more than consumer spending that has been supporting the economy.” This explained why the labour market has struggled to push the unemployment rate below 4.9 percent in recent time.