The results of the Bank of England Monetary Policy Committee (MPC) meeting are out, and they've opted to hold rates and quantitative easing (QE).
At its meeting today, the Committee noted that the incoming data over the past couple of months had been broadly consistent with the central outlook for output growth and inflation contained in the May Report. The significant upward movement in market interest rates would, however, weigh on that outlook; in the Committee’s view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.
The latest remit letter to the MPC from the Chancellor had requested that the Committee provide an assessment, alongside its August Inflation Report, of the case for adopting some form of forward guidance, including the possible use of intermediate thresholds. This analysis would have an important bearing on the Committee’s policy discussions in August.
Rates will stay at 0.5 per cent for the 52nd month, while QE is maintained at £375bn. A bit of an anti-climax.
is today the day people realise Mark Carney doesn't decide UK monetary policy?— Anthony J. Evans (@anthonyjevans) July 4, 2013
Things have been boring at MPC meetings of late, as we've waited for Canadian Mark Carney to show up. Before his arrival, members have voted unanimously to hold rates, and split six to three against increasing asset purchases (QE).
Carney has to deal with a different setup to the Bank of Canada, which he left for the role of governor in the UK. Here, he has but one vote out of nine, as opposed to the greater control he had over decisions in his last job.
Jeremy Cook, chief economist at the currency company, World First, said:
European issues are once again coming to the fore and although it is unclear whether the lag on these developments is hurting growth, similar pains have been hemlock for confidence globally in the past. Combine these with a lower flight path for Chinese growth and I believe that Q3 will see growth indicators moderate substantially as aggregate demand takes another hit.
This will lead the world’s central banks to be called upon once again to help out their respective economies with the Bank of England increasing QE towards £500bn and chatter around Fed tapering its asset purchase program being suspended until at least early 2014.