LONDON (dpa-AFX) - The Bank of England retained its interest rate and quantitative easing unchanged and raised its inflation outlook citing higher energy prices.
The Monetary Policy Committee unanimously decided to leave the key interest rate unchanged at 0.10 percent.
The central bank retained the existing stock of corporate bond purchases at GBP 20 billion and the government bond purchases at GBP 875 billion, taking the size of total quantitative easing to GBP 895 billion.
The MPC voted unanimously to retain corporate bond purchases, while one member sought to reduce government bond purchases by GBP 45 billion to GBP 830 billion.
Michael Saunders observed that with the existing policy stance, inflation was likely to remain above the 2 percent target two and three years ahead and the economic outlook warranted a reduction in the scale of monetary policy stimulus at this MPC meeting.
The committee judged that, should the economy evolve broadly in line with the central projections in the August Monetary Policy Report, some modest tightening of monetary policy over the forecast period was likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term, the bank said in its monetary policy summary.
According to the Monetary Policy Report, inflation is likely to rise temporarily in the near term, to 4 percent in the fourth quarter of 2021, 1.5 percentage points higher than had been expected in the May Report.
Inflation was expected to fall back and was projected to return to close to the 2 percent target in the medium term.
The economy was expected to have risen by 5 percent in the second quarter of 2021, leaving it around 4 percent below its pre-pandemic level and slightly stronger than expected in the May Report.
GDP was projected to expand around 3 percent in the third quarter of 2021, somewhat weaker than expected in the May Report. Thereafter, the economy was set to recover further, reaching its pre-pandemic level in the fourth quarter of 2021.
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