BoE kept Bank Rate unchanged at 0.1%, by unanimous vote, as widely expected. The Committee also decided, by 8-1 vote, to increase the asset purchase target by GBP 100B to GBP 745B. Chief Economist Andrew Haldane dissented and voted for keeping the asset purchase target unchanged at GBP 645B.
On the economy, BoE noted that GDP contracted by around -20% in April. But “evidence from more timely indicators suggests that GDP started to recover thereafter”. While unemployment rate was unchanged at 3.9% in the three months to April, “other and more timely indications from the claimant count, HMRC payrolls data and job vacancies suggest that the labour market has weakened materially”. Business surveys also suggest a “weak outlook for employment in coming quarters”. The “collapse in global oil prices” had direct effects on the slow down of inflation to 0.8% in April, “Sharp drop in domestic activity is also adding to downward pressure on inflation”.
Looking ahead, “the emerging evidence suggests that the fall in global and UK GDP in 2020 Q2 will be less severe than set out in the May Report”. But there is risk of “higher and more persistent unemployment”. “The economy, and especially the labour market, will therefore take some time to recover towards its previous path.”
