17:05 PM, 17th September 2020, About 9 months ago 1
The Bank of England Monetary Policy Committee (MPC) voted unanimously to maintain the Bank Base Rate at 0.1% and for the quantitative easing stock to remain unchanged.
Economic outlook is particularly uncertain, but the bank’s central growth projections still assume the direct impact of Covid-19 on the economy will dissipate gradually and assume an immediate, orderly move to a comprehensive free trade agreement with the European Union on 1 January 2021. CPI inflation is expected to be around the 2% target in two years’ time.
UK GDP in July was 18.5% above the low in April and remains 11.5% below its 2019 Q4 level. 2020 Q3 GDP expectations are around 7% below its 2019 Q4 level, which is less weak than had been expected in the August Bank report.
12 month CPI inflation fell from 1.0% in July to 0.2% in August, consistent with temporary impacts on inflation from the Government’s Eat Out to Help Out scheme and the cut in VAT for hospitality, holiday accommodation and attractions. Therefore, these low inflationary figures are expected to filter out in the short term.
Recent economic data has been a little stronger than the MPC expected, although, given the risks, it is unclear how informative they are about how the economy will perform in the future. The recent increases in Covid-19 cases in some parts of the world, including the United Kingdom, have the potential to weigh further on economic activity, albeit probably on a lesser scale than seen earlier in the year.
The MPC intends to monitor the situation closely and will keep under review the range of actions that could be taken. The Bank does not intend to tighten monetary policy by increasing interest rates until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target over the medium term.
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