Mounted police officers will 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 held interest rates steady on Thursday, reflecting the US Federal Reserve’s moderate tone regarding the prospect of future monetary policy tightening.
The central bank’s Monetary Policy Committee voted unanimously to keep the key lending rate at 0.1% and maintain the target stock of asset purchases at £ 895 billion ($ 1.2 trillion).
It’s because bond yields around the world have risen on expectations of rising inflation and the possibility that central banks could tighten monetary policy sooner than expected. On Wednesday, US Federal Reserve chairman Jerome Powell said the Fed has no plans to raise interest rates until 2023, and the Bank of England hit a similar tone on Thursday.
“The Committee does not intend to tighten monetary policy, at least if there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target on a sustainable basis,” he said.
The BOE has cut rates twice from 0.75% since the start of the pandemic, and has implemented an unprecedented quantitative easing program to steer the UK economy towards recovery.
There has been increasing speculation about an interest rate cut in negative territory. Last month, the BOE said it would take UK lenders at least six months to prepare for an environment of negative interest rates, but stressed that it had no plans to introduce such a measure any time soon.
Since the last meeting of the MPC, official figures have confirmed that in 2020 the UK economy will have suffered the largest annual contraction in more than 300 years. Initial estimates showed, however, that GDP contracted less than expected in January, despite the country being stuck.
The UK government promised in its budget earlier this month to increase its fiscal aid to £ 407 billion in the short term, but charted a gradual winding down and tightening of public finances.
The UK has also made significant strides in introducing Covid-19 vaccinations, with more than 24 million people receiving at least one injection.