BoE kept Bank Rate unchanged at 0.10%, and asset purchase target at GBP 895B as widely expected. Both decisions are made by unanimous 9-0 vote. It doesn’t intend 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. The MPC also stands ready to “take whatever additional action” if inflation outlook weakens.
Since the time of February’s Monetary Policy, advanced economy longer-term government bond yields have “risen rapidly” to similar levels before the pandemic. But an “aggregated measure of UK financial conditions has been broadly unchanged”. At the same time, rates of Covid infections and hospitalizations have “fallen markedly” across the UK and vaccination is proceeding at a rapid pace.
The plans for easing of restriction maybe consistent with a “slightly stronger outlook” for consumption growth in Q2. Labor market slack has remained “higher than implied by the 5.1% LSF unemployment rate. CPI inflation is expected to return to 2% target in spring, reflecting recent in creases in energy prices. But these developments should have “few direct implications” for medium term inflation.
