No changes for BoE policy 

The headline is that the Bank of England has held monetary policy steady:

  • Interest rates stay at +0.10%
  • The total stock of emergency asset purchases stays at £895bn (£875bn of UK government bonds and £20bn of corporate bonds)

This was entirely unsurprising.

Improvements in outlook but the BoE is still cautious

Despite holding fire on policy, there are a few other factors to consider. Initially on the decision (especially on voting) and also with the Quarterly Inflation Report (with regards to the growth and inflation projections). 

It seems that the UK economic recovery is on track, but inflation concerns are still a theme. For now, though, the Bank of England is a little cautious to push ahead with tightening policy.

Firstly, there was arguably a slight surprise in the voting. The decision on interest rates was unanimous, but there was a 7-1 split for the QE. One dissenting voice, (Michael Saunders) voted to reduce to the stock of bonds from £875bn to £830bn. This one dissenter could have been two, but Dave Ramsden, despite giving off hawkish signals in recent weeks, continues to toe the line.

Key takeaways from the projections:

  • Inflation is still a concern, with projections raised for the next two years.
  • Growth has been slightly downgraded this year but looking stronger one year out.
  • The outlook for unemployment continues to improve.
  • A very slight increase (+0.10%) in rates seen in Q3 next year

MPC's Projections


This all seems to change little with regards to where the market has been positioned for the BoE, and this seems to be reflected in the market reaction. 


Initial Market Reaction

GBP has been a little choppy in reaction. After initial swings, we are seeing GBP/USD back around pre-announcement levels.