BoE kept interest rate unchanged at 0.10% as widely expected, with unanimous vote. Asset purchase target was held at GBP 645B, but by 7-2 vote. Two members, Jonathan Haskel and Michael Saunders, preferred to increase the target for the stock of asset purchases by an additional GBP 100B. The central bank said it “stands ready to take further action as necessary to support the economy and ensure a sustained return of inflation to the 2% target.
The central bank said the timeliest indicators of domestic demand have “generally stabilized” at very low levels in recent weeks. Payments data point to around 30% reduction in household consumption. Consumer confidence has “decline markedly” and housing market activity has “practically ceased”. Companies’ sales are expected to be around 45% lower than normal in Q2, business investment 50% lower. Sharp increased in benefit claims are consistent with a pronounced rise in unemployment rate. CPI is likely to “fall below 1%” in the next few months.
