Mounted police officers will be sitting outside the Royal Exchange and the Bank of England in London on 17 June 2020.
TOLGA AKMEN | AFP via Getty Images
The Bank of England on Thursday kept interest rates steady and reflects the devilish tone given by the US Federal Reserve over the prospect of tightening monetary policy in the future.
The central bank’s monetary policy committee unanimously voted to keep its main loan rate at 0.1% and maintain its target stock of asset purchases at £ 895 billion ($ 1.2 billion).
This is because bond yields around the world are higher due to rising inflation expectations, and the possibility that central banks may tighten monetary policy faster than expected. However, US Federal Reserve Chairman Jerome Powell said on Wednesday that the Fed does not intend to raise interest rates until 2023, and the Bank of England showed a similar tone on Thursday.
“The committee does not intend to at least tighten monetary policy until there is clear evidence that significant progress is being made to eliminate free capacity and achieve the 2% inflation target sustainably,” he said.
The BOE has twice reduced its rate of 0.75% since the start of the pandemic, using an unprecedented quantitative easing program as it seeks to steer the UK economy towards recovery.
There is increasing speculation about a rate cut in negative territory. Last month, the BOE said British lenders needed at least six months to prepare for a negative interest rate environment, but stressed that it did not intend to implement such a measure immediately.
Since the last meeting of the MPC, official figures have confirmed that in 2020 the British economy has suffered its biggest annual contraction for more than 300 years. However, initial estimates show that GDP in January was lower than expected, despite the fact that the country was still locked up.
In its Budget earlier this month, the British government promised a short-term expansion of its fiscal support to £ 407 billion, but mapped a gradual phase-out of measures and tightening of the public purse.
The UK has also made significant progress in implementing Covid-19 vaccinations, with more than 24 million people receiving at least one shot.