10:12 AM, 18th December 2020, About 10 months ago 1
The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to maintain the Bank Base Rate at 0.1% and to commence the previously announced programme of £150 billion Quantitative Easing.
The MPC’s projections assume that the pandemic would have a greater effect on consumer spending than projected in the August and that the UK would move immediately to a free trade agreement with the European Union on January 1st.
Under these conditions, UK GDP was projected to decline in Q4, and then pick up as restrictions were assumed to loosen. Nonetheless, the unemployment rate was projected to rise markedly before declining gradually. CPI inflation was expected to be around 2% in two years’ time matching medium-term inflationary targets.
However, since the November Report there has been authorisation of a Covid-19 vaccine and initial plans to roll out widely over the first half of next year. This is likely to reduce the downside risks to the economic outlook from Covid-19 . Financial markets worldwide, and some surveys of businesses and consumers, have reacted positively to these developments which are likely to support future UK and global activity.
Nevertheless, recent global activity has been affected by the increase in Covid-19 cases and associated re-imposition of restrictions. UK-weighted global GDP growth in 2020 Q4 is likely weaker than expected at the time of this report.
in summary don’t respect rates to rise any time soon and the appetite for negative rates seems limited balancing the downsides of this course of action.
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