The Bank of England’s kept rates unchanged at 0.25%
Bond Buyback to continue at GBP 10B
The Bank of England’s Monetary Policy Committee voted by a majority of 5-3 to maintain Bank Rate at 0.25%.
The split among Bank of England policy makers widened this month as three officials called for a rate increase, warning that inflation could rise more than previously thought.
The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at GBP 10B.
The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at GBP 435B.
The pound jumped after the decision and was up 0.24 percent at $1.2781. Bonds fell, with the 10-year gilt yield rising 9 basis points to 1.01 percent.
Citing the pound’s recent decline, the BOE said inflation could overshoot the 2 percent target by more than previously thought. The three hawks also said that slack in the labor market appeared to have diminished.
For the majority, reasons for keeping policy unchanged included slowing consumer spending and economic growth.
The outcome of the U.K. vote complicates the prospects for Brexit talks. When the BOE updated its economic forecasts last month, it assumed that Britain’s adjustment to a new relationship with the European Union will be “smooth” — avoiding a so-called cliff edge.
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