BoE left Bank Rate unchanged at 0.10% by unanimous vote. Though, it voted 8-1 to keep asset purchases target at GBP 895B. Chief economist Andrew Haldane voted to again to lower the target to GBP 845B. BoE said that the “existing stance of monetary policy remained appropriate” to meet the 2% inflation target and to sustain growth and employment.
Bank staff have “revised up” Q2 GDP growth expectation by 1.50% since the May MPR, as restrictions on economic activity have eased. June output is expected to be around -2.50% below pre-Covid 2019 Q4 level. Labor market slack remained “higher than implied” by the 4.7% unemployment rate in the three months to April.
CPI inflation is expected to “pick up further above the target” and is “likely to exceed 3% for a temporary period”. The “central expectation” is that after a strong period, “growth and inflation will fall back”. But there are “two-sided risks around this central path”. “Inflation expectations remain well anchored”.
The Committee will continue to monitor the situation closely and will have the opportunity to assess the economic outlook “more fully” in the August MPR and projections.
