BoE Governor Andrew Bailey said in a speech that the February forward guidance is “a recognition of the scale of the shock, the high level of uncertainty and the risks around the Covid recovery, which are still on balance distributed on the downside, though less so as time goes by”. It also set out that there is a “burden of proof” policymakers will need on the “sustainability of the recovery”.
He also reiterated that while BoE asked banks to make preparations for negative interest rates within the next six months, it “should not be interpreted as a signal about the future path of monetary policy”. “This implies nothing about our intentions in that direction, and nor does it imply that negative rates are our chosen marginal policy tool”, he added.
BoE’s February forward guidance: “If the outlook for inflation weakens the Committee stands ready to take whatever additional action is necessary to achieve its remit. The Committee does not 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”.
