BOE maintains interest at record lows
Print Edition
The Bank of England kept its bond-buying program unchanged and held its benchmark interest rate at a historic low of 0.1 percent yesterday but gave fresh clues as to how it would start weaning the economy off pandemic support.
The Bank said it would start reducing its stock of bonds when its policy rate reaches 0.5 percent by not reinvesting proceeds and that it would consider actively selling down holdings when the rate reaches at least 1 percent.
Economists in a Reuters poll had expected no immediate policy changes by the BOE, despite a post-lockdown rise in inflation. The BOE said its Monetary Policy Committee voted 7-1 to keep its government bond-buying program at 875 billion pounds (US$1.22 trillion), with only Michael Saunders voting to scale back.
The Federal Reserve鈥檚 top policy-makers are also showing signs of a split about how quickly the US central bank might need to scale back its quantitative easing plan.
The BOE鈥檚 MPC voted unanimously to make no changes to its Bank Rate benchmark borrowing rate and to leave its 20 billion-pound stock of corporate bond purchases unchanged.
British inflation jumped to 2.5 percent in June and the BOE said in a new set of forecasts that it was on course to rise even further above its 2 percent target in the months ahead.
The central bank said it now saw inflation hitting a peak of 4 percent in late 2021 and early 2022. In May, it had forecast a peak of 2.5 percent.
But the BOE said those levels would prove to be temporary.
The BOE also said it still expected Britain鈥檚 economy would grow 7.25 percent in 2021, unchanged from its May forecast, but it raised slightly its estimate for growth in 2022 to 6 percent from 5.75 percent.
The new guidance on cutting support was eagerly anticipated by financial markets.
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