Bank of England’s Monetary Policy Statement (11th May 2017).

Weaker consumption in Q1
“Aggregate demand slowed markedly in 2017 Q1…The slowdown appears to be concentrated in consumer-facing sectors, partly reflecting the impact of sterling’s past depreciation on household income and spending….consumption growth will be slower in the near term than previously anticipated before recovering in the latter part of the forecast period as real income picks up.”
Improved global outlook
“The outlook for global activity continues to improve.  Business surveys and Bank Agents’ reports imply that business investment growth is likely to be higher in 2017 than previously projected. The stronger global outlook and the level of sterling are providing incentives for many exporters to renew and increase capacity.”¨
Inflation has risen above target
“CPI inflation has risen above the MPC’s 2% target as the depreciation of sterling has begun to feed through to consumer prices….The MPC expects inflation to rise further above the target in the coming months, peaking a little below 3% in the fourth quarter.”
There will be consequences to Brexit
“Monetary policy cannot prevent either the necessary real adjustment as the United Kingdom moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany that adjustment over the next few years”
A smooth Brexit will help in achieving targets
“In the final year of the forecast, however, the output gap closes and inflation rises slightly further above the target. This is conditioned on the assumptions that the adjustment to the United Kingdom’s new relationship with the European Union is smooth, and that Bank Rate follows the market-implied path for interest rates.”
http://www.bankofengland.co.uk/publications/Pages/news/2017/003.aspx

Bank of England Monetary Policy Statement December 2016

A unanimous decision to maintain the status quo

“…the Committee 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”

Increase in Long-term interest rates with a fragile global outlook

“Since November, long-term interest rates have risen internationally, including in the United Kingdom.  In part, this reflects expectations of looser fiscal policy in the United States which, if it materialises, will help to underpin the slightly greater momentum in the global economy evident in a range of data since the summer.  At the same time, however, the global outlook has become more fragile, with risks in China, the euro area and some emerging markets, and an increase in policy uncertainty.”

They are ready to respond up or down with monetary policy direction

“Earlier in the year, the Committee noted that the path of monetary policy following the referendum on EU membership would depend on the evolution of the prospects for demand, supply, the exchange rate, and therefore inflation.  This remains the case.  Monetary policy can respond, in either direction, to changes to the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.”

Rising inflationary expectations

“Twelve-month CPI inflation stood at 1.2% in November, up from 0.9% in October and 1.0% in September.  Looking forward, the MPC expects inflation to rise to the 2% target within six months.”

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

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.”

Bank of England (BoE) Monetary Policy Summary Aug 2016

A package of measures released

“…the MPC voted for a package of measures designed to provide additional support to growth and to achieve a sustainable return of inflation to the target. This package comprises: a 25 basis point cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of £60 billion…”

Inflation is expected to rise above target in the near term

“The fall in sterling is likely to push up on CPI inflation in the near term, hastening its return to the 2% target and probably causing it to rise above the target in the latter part of the MPC’s forecast period, before the exchange rate effect dissipates thereafter. ”

Flat GDP growth expected in H2

“…recent surveys of business activity,confidence and optimism suggest that the United Kingdom is likely to see little growth in GDP in the second half of this year.”

The stimulus meant to to reduce spare capacity

“Given the extent of the likely weakness in demand relative to supply, the MPC judges it appropriate to provide additional stimulus to the economy, thereby reducing the amount of spare capacity at the cost of a temporary period of above-target inflation.”

The near-zero interest rates limit the effectiveness of a further cut in interest rates

“The cut in Bank Rate will lower borrowing costs for households and businesses.  However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates.  In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate.”

Expanded asset purchase programme intended to lower yields and stimulate “risk on” attitude

“The expansion of the Bank of England’s asset purchase programme for UK government bonds will impart monetary stimulus by lowering the yields on securities that are used to determine the cost of borrowing for households and businesses.  It is also likely to trigger portfolio rebalancing into riskier assets by current.”

Expect further cuts

“If the incoming data prove broadly consistent with the August Inflation Report forecast, 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 the year.”