Bank of England holds fire on monetary policy action

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The Bank of England’s Monetary Policy Committee has decided action any action at today’s meeting, leaving investors looking to next week’s Inflation Report.

The MPC held the base rate at its historic low of 0.5 per cent and voted to maintain its quantitative easing programme at £375bn.

Next Wednesday sees new BoE governor Mark Carney deliver his first Inflation Report, which will be watched for signs of forward guidance on the Bank’s monetary policy direction. 

Santander UK chief economist Barry Naisbitt says: “There has been considerable media attention on the new Bank of England governor, Mark Carney, to see what changes he and the MPC might make to monetary policy.

”With inflation at 2.9 per cent and the MPC about to reveal its hand on the possibility of offering forward guidance on policy, the decision to hold bank rate and quantitative easing again this month was widely expected. There is greater interest in the August Inflation Report and press conference, where the forecasts for growth and inflation will be updated and possible changes to policy procedures will be outlined.”

IHS Global Insight chief UK & European economist Howard Archer adds: “We expect interest rates are likely to stay at 0.5 per cent until at least late-2015. We expect the Bank of England under Mark Carney will retain the view that lower interest rates may not be beneficial overall for the economy.”

The minutes of the meeting will be published Wednesday 14 August.

Schroders European economist Azad Zangana says: “We expect forward guidance on interest rates to be introduced in the near future along with scenario analysis to explain how the Bank of England would react if the economy was to surprise significantly on the upside or downside.

”At the juncture, given the improvement in economic activity, we do not expect the Bank to add any additional stimulus, at least, not without another significant slowdown or rising risk of recession. Given the severe headwinds the UK economy faces, those downside risks are by no means gone. However, we expect a cautiously more optimistic tone from the new governor at his Inflation Report debut.”