Lockdown keeps inflationary pressure low – No change to Base Rate

Lockdown keeps inflationary pressure low – No change to Base Rate

10:21 AM, 19th March 2021, About 7 months ago 2

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The Bank of England’s Monetary Policy Committee has voted unanimously again to keep the Bank Base Rate at 0.1% with no change to the quantitative easing programme.

The inflation rate is not expected to return to the target of 2% until late spring and remain there until past the 3rd quarter. Therefore, it was unsurprisingly not considered necessary to put any brakes on the economy at this early stage before any meaningful lockdown restrictions have been eased. CPI inflation increased only marginally to 0.7% in January.

The MPC said: “There is no intention 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.”

UK GDP fell by 2.9% in January. This was less weak than expected, due mainly to developments in public sector output, but still leaves GDP around 10% below its 2019 Q4 level. The news in recent plans for the easing of restrictions on activity may be consistent with a slightly stronger outlook for consumption growth in 2021 Q2 than was anticipated in February.

The unemployment rate rose to 5.1% in the three months to December, but the extension of the Government’s employment support schemes is likely to mean that the near-term rise in unemployment will be more moderate than suggested by the MPC’s February Report projections, which had been constructed on the basis of government policy at that time.



Comments

by JB

9:58 AM, 22nd March 2021, About 7 months ago

Many thanks for your report Neil - I always read them with interest.

Do you have any predictions for inflation and house prices beyond the 3rd quarter?

by Neil Patterson

10:44 AM, 22nd March 2021, About 7 months ago

Reply to the comment left by JB at 22/03/2021 - 09:58
Unfortunately, there are too many unknown variables so any predictions further out would be pure guesswork by anyone including the BofE.


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