Bank of England´s (BoE) Monetary Policy Summary September 2016

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Unanimous support for current monetary policy to continue

“…the MPC voted unanimously to maintain Bank Rate at 0.25%.  The Committee voted unanimously to continue with the programme of sterling non-financial investment-grade corporate bond purchases totalling up to £10 billion, financed by the issuance of central bank reserves.  The Committee also voted unanimously to continue with the programme of £60 billion of UK government bond purchases to take the total stock of these purchases to £435 billion, financed by the issuance of central bank reserves.”

The initial impact of the measures undertaken in August

“The package of measures announced by the Committee at its August meeting led to a greater than anticipated boost to UK asset prices.  Short and long-term market interest rates fell notably following the announcement; corporate bond spreads narrowed, and issuance was strong; and equity prices rose.  Since then, some of the falls in yields have reversed, driven by somewhat stronger-than-expected UK data and a generalised rise in global yields.”

The outlook for H2 2016

“The Committee now expect less of a slowing in UK GDP growth in the second half of 2016.”

There is room for further cuts of rates to a little above zero

“The Committee will assess that news, along with other forthcoming indicators, during its November forecast round.  If, in light of that full updated assessment, the outlook at that time is judged to be broadly consistent with the August Inflation Report projections, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of this year.  The MPC currently judges this bound to be close to, but a little above, zero.”