Update: Bank of England keeps gunpowder dry

Update: Bank of England keeps gunpowder dry

Thu 18 Mar 2021 at 1:52 pm

(ABM FN-Dow Jones) The Bank of England did not change its monetary policy as expected. This became evident on Thursday in the Central Bank of London interest rate decision, which was taken unanimously.

The policy interest rate remained at 0.1 per cent and the repurchase program kept its volume of £ 895 billion.

In February, the BoE said negative interest rates were an option, albeit only in exceptional cases. But since then, the number of coronavirus infections has decreased, while more and more people have been vaccinated.

Prime Minister Boris Johnson also developed a roadmap to ease the lockdown measures that have put the economy under severe stress. These and other developments mean that the central bank is now expecting a moderate rise in unemployment compared to February.

Global economic growth is somewhat better than expected, and a large new package of US government stimulus should provide significant additional support. Along with the good news about some vaccination programs, long-term bond yields for advanced economies have risen rapidly to levels similar to the situation. Just before the pandemic, “the Bank of England said.

Just like in the US, the ten-year interest rate on UK government bonds has also risen sharply in recent weeks, from 0.20 per cent at the start of this year to 0.79 per cent. However, analysts do not expect the Bank of England, similar to the European Central Bank, to start buying bonds at a faster pace to stem this rapid rate hike, since the BoE has much less room for it.

The central bank indicated on Thursday that the UK’s fiscal environment has not really changed, although inflation is heading in the right direction.

The financial markets’ reaction to the interest rate decision, which according to market analyst Naeem Aslam from Ava Trade, was “boring” and did not move aggressively. He says the action in stock markets comes from the Fed’s interest rate decision on Wednesday evening. The British pound also showed slight movement.

Update: To add additional information and comments.

ABM Financial News; [email protected]; Revised text: +31 (0) 20 26 28999.