BOE announces its latest monetary policy decision - 4 February 2021
- Prior 0.10%
- Bank rate votes 0-0-9 vs 0-0-9 expected
- Gilts purchases £875 billion
- Corporate bond purchases £20 billion
- Total asset program £895 billion (unchanged)
- Existing stance of monetary policy remains appropriate
- Financial markets have remained resilient
- GDP is projected to recover rapidly towards pre-virus levels over 2021
- Vaccine rollout is assumed to lead to an easing of virus-related restrictions
- Outlook for the economy remains unusually uncertain
- CPI inflation is expected to rise quite sharply towards the 2% target in the spring
- 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
- Full statement
The BOE also cuts its growth projections for the year, estimating that 2021 GDP will be at 5% as compared to the November forecast of 7.25%. That said, the pound is jumping higher as the central bank steers clear from firm commitment to negative rates once again.
In the updated review, the BOE says its actions should not be construed as a signal that negative rates are coming and that it carries an operational risk. However, the central bank still says that financial institutions should start preparations if needed.
As such, the BOE also says that it is starting work on a tiered system in case there is a need to cut rates below zero. But for now, the odds are that is looking less likely to be the case.
