Bank of England fine-tunes inflation outlook, expands quantitative easing policy split

The Bank of England-Bank of England said inflation will exceed 4% later this year, and two policymakers called for an early termination of the central bank’s quantitative easing program due to rising price pressure.

Policy makers set up £ 895 billion ($ 1.2 trillion) in asset purchases in November 2020 when the Bank of England’s Monetary Policy Committee decided to buy another £ 150 billion in government bonds during 2021. I voted 7–2 to keep my goal.

BoE Vice President Dave Ramsden has joined Michael Sanders and voted for the early termination of the bond purchase program.

The MPC unanimously resolved to keep interest rates at 0.1%.

The Bank of England said it has revised its forecast for GDP levels in the third quarter down about 1% from its August report, reflecting supply constraints.

However, inflation said it would “temporarily” exceed 4% in the final quarter of this year.

“Since the MPC meeting in August, the pace of recovery in global activity has shown signs of slowing. Global inflationary pressures continue to be strong and cost pressures against the backdrop of strong commodity demand and continued supply constraints. There are some signs that may be more persistent, “says BoE.

Last month, the Bank of England said it expects the economy to regain its pre-pandemic scale in the last three months of 2021 while at the same time inflation is expected to reach its 10-year high of 4%.

UK consumer price inflation reached a nine-year high of 3.2% in August, but COVID-19’s recovery from the pandemic has slowed, with some economists supporting layoffs at the end of this month. We see the risk of rising unemployment if the layoffs stop.

Prior to Thursday’s decision, interest rate futures are more than 60% likely to rise to 0.25% in February next year, and are likely to rise further to 0.5% by the end of 2022.

Most economists polled by Reuters earlier this month believed the BoE would raise interest rates only once in the relatively late 2022 period.

($ 1 = 0.7300 pounds)

David Milliken and Andy Bruce

follow