The
Bank of England (BoE) announced its Monetary Policy Committee (MPC) voted by a
majority of 7-2 to keep the Bank Rate at 0.1 percent at its November meeting,
as economists expected.
The
MPC also voted unanimously to maintain the stock of sterling non-financial
investment-grade corporate bond purchases at GBP20 billion and voted by a
majority of 7-6-3 to continue with the existing programme of UK government bond
purchases at GBP875 billion, thus maintaining the total target stock of asset
purchases at GBP895 billion.
In
its statement, the BoE notes:
- MPC
judged that existing stance of monetary policy remained appropriate;
- MPC
updated central projections for activity and inflation are set out in
accompanying November Monetary Policy Report. The projections are conditioned
on asset and energy prices averaged over 15 days to 27 October. This gives a
market-implied path for Bank Rate that rises to around 1% by the end of 2022;
- While
bottlenecks will continue to restrain growth somewhat in near term, global and
UK GDP are nonetheless expected to recover further from the Covid effects;
- UK
GDP is projected to get back to its 2019 Q4 level in 2022 Q1;
- Wholesale
gas prices have risen sharply since August. CPI inflation is now expected to
peak at around 5% in April 2022, materially higher than expected in August;
- Upward
pressure on CPI inflation is expected to dissipate over time, as supply
disruption eases, global demand rebalances, and energy prices stop rising. As
result, CPI inflation is projected to fall back materially from second half of
next year;
- CPI
inflation is projected to be a little above 2% target in two years’ time and
just below target at the end of the forecast period;
- Near-term
uncertainties remain, especially around the outlook for labour market, and
extent to which domestic cost and price pressures persist into the medium term;
- MPC
judges that, provided incoming data, particularly on labour market, are broadly
in line with central projections in November Monetary Policy Report, it will be
necessary over coming months to increase Bank Rate in order to return CPI
inflation sustainably to 2% target