Bank of England left interest rate at 0.1%, but increased its asset purchase program to £895 billion from £745 billion

At its meeting ending on 4 November 2020, the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to maintain Bank Rate at 0.1%.

The Committee voted unanimously for the Bank of England to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £20 billion.  

The Committee voted unanimously for the Bank of England to continue with the existing programme of £100 billion of UK government bond purchases, financed by the issuance of central bank reserves, and also for the Bank of England to increase the target stock of purchased UK government bonds by an additional £150 billion, financed by the issuance of central bank reserves, to take the total stock of government bond purchases to £875 billion.

There are signs that consumer spending has softened across a range of high-frequency indicators, while investment intentions have remained weak.  

The Committee’s latest projections for activity and inflation assume that developments related to Covid will weigh on near-term spending to a greater extent than projected in the August Report, leading to a decline in GDP in 2020 Q4.  

Household spending and GDP are expected to pick up in 2021 Q1, as restrictions loosen.  

The level of activity in the first quarter is expected to remain materially lower than in 2019 Q4.  

UK trade and GDP are also likely to be affected during an initial period of adjustment, over the first half of next year.  

Over the remainder of the forecast period, GDP is projected to recover further as the direct impact of Covid on the economy is assumed to wane.  

Activity is also supported by the substantial fiscal policies already announced and accommodative monetary policy.  

The recovery takes time, however, and the risks around the GDP projection are judged to be skewed to the downside.