BOE leaves bank rate unchanged at 0.75%; votes 0-0-9

Author: Justin Low | Category: Central Banks

BOE announces its latest monetary policy decision - 1 August 2019


  • Prior 0.75%
  • Official bank rate votes 0-0-9 vs 0-0-9 expected
  • Asset purchase target £435 billion
  • Corporate bond target £10 billion
Here's the details of the statement and the inflation report:

  • Detailed projections do not include a no-deal Brexit possibility
  • Continues to assume a smooth Brexit scenario
  • In such an outcome, it would mean gradual rate hikes
  • Gradual and limited tightening remains appropriate
  • Monetary policy response to whatever form Brexit takes will not be automatic
  • Says that rates could go in either direction
  • Weaker short-term growth outlook reflects more entrenched Brexit uncertainty
  • Labour market no longer appears to be tightening but pay growth is stabilising
  • Estimates GDP growth of 0.0% q/q in Q2 2019
  • Sees GDP growth of +0.3% q/q in Q3 2019
  • Sees 2019 GDP of +1.3% (previously +1.5%)
  • Sees 2020 GDP of +1.3% (previously +1.6%)
  • Sees 2021 GDP of +2.3% (previously +2.1%)
  • Inflation seen at 1.90% in one year's time (previously 1.72%)
  • Inflation seen at 2.23% in two years' time (previously 2.05%)
  • Inflation seen at 2.37% in three years' time (previously 2.16%)

Besides a whole bunch of forecast downgrades to economic growth and the inflation report, there isn't much else that really stands out here. The BOE still stands by their view of a smooth Brexit scenario and makes no detailed mention of a no-deal outcome.

In other words, it's more or less a reiteration of the statement in June just that with a few minor changes here and there to the economic outlook.

The forward guidance remains unchanged as they continue to view "limited and gradual" tightening to be appropriate and in the inflation report, they do acknowledge that markets are pricing in rate cuts and potential easing but offer no correction or view towards that assessment. We'll have to wait on Carney for more details.

The pound is holding steady on the decision with cable little changed around 1.2100-15 levels.

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