BoE leaves Bank Rate at 0.1%, as widely expected

The Bank of England (BoE) announced its Monetary Policy Committee (MPC) voted 9-0 to maintain Bank Rate at 0.1 percent at its February meeting, as widely expected.

The MPC also voted unanimously to continue with its existing programmes of UK government bond and sterling non-financial investment-grade corporate bond purchases, maintaining the target for the total stock of these purchases at GBP895 billion.

In the statement, the BoE notes:

• MPC judged that existing stance of monetary policy remains appropriate;
• Covid-19 (Covid) vaccination programmes are under way, which has improved the economic outlook;
• nevertheless, recent activity has been affected by increase in Covid cases, including from newly identified strains of the virus, and associated reimposition of restrictions;
• UK GDP is expected to have risen little in 2020 Q4 to a level around 8% lower than in 2019 Q4; this is materially stronger than expected in November;
• UK GDP is expected to fall by around 4% in 2021 Q1, in contrast to expectations of rise in November;
• GDP is projected to recover rapidly towards pre-Covid levels over 2021, as vaccination programme is assumed to lead to easing of Covid-related restrictions and people’s health concerns;
• CPI inflation is expected to rise quite sharply towards the 2% target in spring, as reduction in VAT for certain services comes to end and given developments in energy prices;
• CPI inflation is projected to be close to 2% over the second and third years of the forecast period
• Outlook for economy remains unusually uncertain;
• MPC will continue to monitor situation closely; if the outlook for inflation weakens, Committee stands ready to take whatever additional action is necessary to achieve its remit;
• Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving 2% inflation target sustainably.