BoE left monetary policy unchanged as widely expected. Bank Rate was held at 0.75% with 7-2 vote. Jonathan Haskel and Michael Saunders dissented and voted for -25bps rate cut again. Asset purchase target was kept at GBP 435B on unanimous vote.
In the accompanying statement, BoE said since the previous meeting “economic data have been broadly in line” with November forecasts. GDP is expected rise “only marginally” in Q4. Household consumption has continued to grow steadily, but business investment and export orders have remained weak. There were some signs of “loosening” in labor market, but it remains tight. Headline CPI is expected to fall to around 1.75% by spring, “owing to the temporary effects of falls in regulated energy and water prices.”
BoE also noted that “monetary policy could respond in either direction to changes in the economic outlook”. “monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation” should Brexit uncertainties remain entrenched, or global growth fails to stabilize. However, if the risks do not materialize and economy recovers in line with latest projections, “some modest tightening of policy, at a gradual pace and to a limited extent, may be needed”.
