Mounted police officers sit outside the Royal Exchange and the Bank of England in London on June 17, 2020.
TOLGA AKMEN | AFP via Getty Images
The Bank of England kept interest rates stable on Thursday and reflected the dark tone set by the US Federal Reserve on the prospect of a tightening of monetary policy.
The Central Bank’s Monetary Policy Committee voted unanimously to keep its main credit rate at 0.1% and keep its target asset purchase stock at 895 billion pounds ($ 1.2 trillion).
It occurs as bond yields around the world have risen in line with inflationary growth expectations and the possibility that central banks may tighten monetary policy earlier than expected. On Wednesday, however, U.S. Federal Reserve Chairman Jerome Powell said the Fed has no plans to raise interest rates until 2023 and that the Bank of England adopted a similar tone on Thursday.
“The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating excess capacity and in achieving the sustainable 2% inflation target,” he said. .
The BOE has cut rates twice since the start of the 0.75% pandemic and has deployed an unprecedented quantitative easing program as it appears to be steering the British economy towards recovery.
There has been growing speculation about a rate cut in negative territory. Last month, the BOE said British lenders would need at least six months to prepare for a negative interest rate environment, but stressed that it had no plans to deploy the measure imminently.
Since the last MPC meeting, official figures confirmed that the UK economy suffered the largest annual contraction for more than 300 years in 2020. However, initial estimates showed that GDP was declining. contract less than expected in January despite the country remaining closed.
In its budget earlier this month, the British government promised to expand its tax support to £ 407 billion in the short term, but outlined a gradual roll-out of measures and a tightening of the public stock market.
The UK has also made significant progress in its implementation of Covid-19 vaccines, with more than 24 million people receiving at least one shot.