BoE left Bank Rate unchanged at 0.75% as widely expected while asset purchase target is held at GBP 435B. However, the vote on policy rate was no unanimous, by 7-2. Two members (Jonathan Haskel and Michael Saunders) voted against the proposition, preferring to reduce Bank Rate by 25 basis points to 0.50%.
However, the accompanying statement still noted that provided that risks on Brexit and global growth do not materialize, and the economy recovers broadly in line with latest projections, “some modest tightening of policy, at a gradual pace and to a limited extent, may be needed to maintain inflation sustainably at the target.”
In the new economic projections published in the Monetary Policy Report, BoE projects GDP growth to pick up from 1.0% in 2019 Q4, to 1.5% in 2020 Q4, 1.8% in 2021 Q4 and 2.1% in 2022 Q4. Inflation is forecast to remain subdued at 1.4% in 2019 Q4 , and 1.5% in 2020 Q4. Though, CPI could finally hit target at 2.0% in 2021 Q4 and then 2.2% in 2022 Q4.
The path of Bank Rate implied for forward market interest rate would drop from 0.7% to 0.5% in 2020 Q4, and stay there throughout the projection horizon.