BoE leaves Bank Rate at 0.1%, as expected

The Bank of England (BoE) announced its Monetary Policy Committee (MPC) voted 9-0 to keep the Bank Rate at 0.1 percent at its June meeting, as widely 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 8-1 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 the existing stance of monetary policy remained appropriate;
• MPC sets monetary policy to meet the 2% inflation target, and in way that helps to sustain growth and employment;
• Bank’s staff have revised up their expectations for level of UK GDP in 2021 Q2 by around 1.5% since the May Report, as restrictions on economic activity have eased, so that output in June is expected to be around 2.5% below its pre-Covid 2019 Q4 level;
• Direct economic implications of delays in the final stages of relaxation of Covid restrictions are likely to be relatively small compared with impact of previous stages;
• CPI inflation is expected to pick up further above MPC’s 2% target, owing primarily to developments in energy and other commodity prices, and is likely to exceed 3% for a temporary period;
• Output in number of sectors is now around pre-Covid levels, although it remains materially below in others;
• There is uncertainty around how many of individuals will resume their search for a job, and when;
• The number of furloughed jobs has declined faster than expected, as demand has recovered;
• MPC’s expectation is that direct impact of rises in commodity prices on CPI inflation will be transitory
• MPC’s central expectation is that UK’s economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back;
• It is possible that near-term upward pressure on prices could prove somewhat larger than expected;
• MPC judges that UK inflation expectations remain well anchored;
• In judging appropriate stance of monetary policy, MPC will focus on medium-term prospects for inflation, including balance between demand and supply, and medium-term inflation expectations, rather than factors that are likely to be transient; 
• MPC will continue to monitor situation closely and will take whatever action is necessary to achieve its remit;
• MPC 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 the 2% inflation target sustainably;
• MPC will have opportunity to assess the economic outlook more fully in context of its August Monetary Policy Report and accompanying economic projections