International Commentary: Bank of England leaves policy rate unchanged (at 25 basis points), maintains current pace of asset purchases, but drops guidance on the next bank rate decision
- The Monetary Policy Committee (MPC) for the Bank of England (BoE) voted unanimously to leave monetary policy unchanged this morning, keeping the bank rate at 0.25% and maintained its current pace of asset purchases. Most notable was the removal of MPC guidance put in place at its September meeting concerning the likely downward trajectory of the next bank rate decision.
- The outlook for the UK economy was broadly revised up since this past August. The latest modal projections from the November Inflation Report anticipate growth in real GDP of 2.2% in 2016 (+0.2 ppts), 1.4% in 2017 (+0.6 ppts), and 1.5% in 2018 (-0.3 ppts). While some of the near-term revisions reflect better than expected growth in 16Q3 (+2.0% q/q annualized), the firmer growth outlook generally reflects stronger spending by households, smaller declines in business investment, and slightly better growth in exports due to a weaker pound. As a result, the level of GDP is now about 0.5 percentage points stronger than forecast back in August through 2018.
- The supply side outlook remains broadly unchanged, with the only exception of marginally better productivity growth owing to the smaller expected decline in business investment this year and next. The outlook for inflation was revised up, peaking at 2.8% on average at the end of 2017 before falling off modestly thereafter.