Bank of England keeps policy unchanged

The Monetary Policy Committee kept Bank Rate unchanged at 0.50% and the size of its asset purchase facility at £375bn, both as expected by analysts.

The Bank of England kept its policy unchanged as it continued to see “at least some” underutilised resources in the economy.

At its 10 September meeting the Monetary Policy Committee decided to keep Bank Rate unchanged at 0.50% and the size of its asset purchase facility at £375bn, both as expected by analysts.

The decision came amid recent sharp volatility in global financial markets and a near halving in the price of oil year-to-date.

In its statement, the Bank stuck to the same line as Governor Mark Carney in his latest speech, delivered at the US Federal Reserve’s last annual Economic Symposium in Jackson Hole, Wyoming.

At that gathering of global policy-makers, on 29 August, Dr. Carney indicated that while external shocks or strength in the pound might delay the first hike in Bank Rate they would not derail the process.

Carney said recent events do not yet merit changing the MPC’s strategy for returning inflation to target.

As of 9 September, derivatives markets were not pricing in the first increase until September 2016, which many economists believed was far too cautious.

On prices, the BoE emphasised that about three quarters of the gap between the most recent read on consumer price inflation, at 0.1% year-on-year, and the target reflects unusually low contributions from energy, food, and other imported goods prices.

However, it did admit that the annual rate of growth in wage costs, at around 1%, was running below what would be consistent with returning it to the MPC’s target within two years.

Nonetheless, “global developments do not as yet appear sufficient to alter materially the central outlook described in the August Report, but the greater downside risks to the global environment merit close monitoring for any impact on domestic economic activity,” the policy statement concluded.