Threadneedle Street keeps monetary policy unchanged again this month
THE Bank of England this month held interest rates, keeping monetary policy ultra-loose. Interest rates remained at their historic low of 0.5 per cent and the stock of asset purchases was held at £200bn. Economists had expected the Monetary Policy Committee (MPC) to hold fire this month and said it would have been an enormous surprise had the committee chosen to do anything else.
For now, it appears that concerns about growth and fiscal austerity measures have outweighed the issue posed by sticky inflation. Commerzbank’s Peter Dixon said: “Although there are indications that some members are increasingly concerned about a pick-up in inflation, we expect that the sharp tightening of the fiscal stance outlined in the June budget will act to keep rates on hold for many months to come.”
More interesting will be the minutes released on 21 July, which will show whether any other members joined Andrew Sentance in the hawkish camp. He was the lone dissenter in calling for a rate hike in June.
Simon Hayes at Barclays Capital said: “We would expect Sentance to have dissented once more. It is also possible that one or more other MPC members may have joined Sentance in the hawkish camp. But our assessment is that a majority of members remains sufficiently concerned about the robustness of the recovery that a near-term rate hike is unlikely.”