Bank of England keeps interest rate unchanged; votes 7-2

0
27
Panorama of a city business district with office buildings and skyscrapers and superimposed data, charts and diagrams related to stock market, currency exchange and global finance. Blue line graphs with numbers and exchange rates, candlestick charts and financial figures fill the image with a glowing light. Sunset light.
imageEconomy17 hours ago (Nov 04, 2021 12:06)

© Reuters.

By Samuel Indyk

Investing.com – The Bank of England voted 7-2 to keep its Bank Rate unchanged at 0.1% on Thursday. Sir Dave Ramsden and Michael Saunders voted against the proposition, preferring to increase the Bank Rate by 15 basis points to 0.25%.

There had been expectations that the Monetary Policy Committee could raise the interest rate at this meeting, given recent comments from officials, including Governor Andrew Bailey.

Last month, Bailey said that the central bank may need to act to contain inflation and inflation expectations which led to an aggressive re-pricing. Markets had priced an interest rate hike today, plus at least 100 basis points of tightening by this time next year.

Despite remaining on hold at this meeting, the Committee still judged that it will be necessary over coming months to increase the Bank Rate in order to return CPI inflation to the 2% target.

“It was a surprisingly dovish split in today’s rate decision,” said interactive investor Head of Investment Victoria Scholar. “Clearly the central bank wants to wait for further data to come through on the labour market rather than bringing about any economic strain through hawkish policy in its combat against inflation.”

The Committee also voted by a majority of 6-3 for the Bank of England to continue with its existing programme of UK government bond purchases. Catherine Mann joined Ramsden and Saunders in voting to reduce the target for the stock of UK government bond purchases from £875 billion to £855 billion.

Outlook for inflation

The Bank of England expected CPI inflation to peak at around 5% in April next year, materially higher than expected in the August report. However, they expect the upward pressure to dissipate over time, as supply diruptions ease, global demand rebalances, and energy prices stop rising.

“As a result, CPI inflation is projected to fall back materially from the second half of next year,” the Bank said in its Monetary Policy Summary.

Market Reaction

GBP weakened in the immediate aftermath of the decision with GBP/USD dropping around 100 pips in the 15 minutes following the announcement. GBP/USD currently trades at its lowest level since 6th October.

Shorter dated gilts jumped with the UK 2-Year yield dropping over 10 basis points and below 0.6%. The UK 10-Year yield fell by over 6.5 basis points to 1.0%.

Bank of England keeps interest rate unchanged; votes 7-2

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

LEAVE A REPLY

Please enter your comment!
Please enter your name here