Bank of England holds bank rate at 0.25%

The Bank of England's Monetary Policy Committee voted unanimously to maintain Bank Rate at 0.25% in its latest meeting.

Related topics:  Finance News
Rozi Jones
15th September 2016
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"A further rate change was never really on the cards – and encouraging signals from recent trade and employment data suggest resilience in the UK economy."

Discussing the decision to leave Bank Rate unchanged, The Committee said that "the economic outlook following the EU referendum had not changed", but said another rate cut was likely before the end of the year.

Last month, in a much-anticipated move, the Bank of England voted to cut the base rate to 0.25% and announced plans to introduce a package of measures designed to provide additional monetary stimulus.

The MPC said these measures led to a greater than anticipated boost to UK asset prices, stating that "short and long-term market interest rates fell notably following the announcement".

The MPC says it will address this, along with other forthcoming indicators, during its November forecast round.

If the outlook at that time is judged to be broadly consistent with projections, a majority of members expect to support a further cut in Bank Rate 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.

The Committee also voted unanimously to continue its £10 billion corporate bond purchase scheme, as well as its programme of £60 billion of UK government bond purchases to take the total stock of these purchases to £435 billion.

Nick Dixon, Investment Director at Aegon, commented: “A further rate change was never really on the cards – and encouraging signals from recent trade and employment data suggest resilience in the UK economy. We remain of the view that inflation has reached an inflection point and will start to rise during Q4 leading to a rate increase in the first half of 2017. It is possible that subsequent rate increases exceed market expectations, so mortgage holders may want to consider fixing their rate now, rather than rely on persistently low interest rates.”

Jeremy Duncombe, Director, Legal & General Mortgage Club, added: “After last month’s interest rate drop, it is unsurprising to see that the Bank of England has decided to maintain the base rate at its historical low of 0.25%. The mortgage market has experienced a real buzz of positive activity following last month’s decision, with a real feeling of resilience permeating throughout."

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