Bank Of England Holds Rates, Asset Purchase Target Steady

Bank of England policymakers unanimously left the key interest rate and asset purchase targets unchanged on Thursday, as expected.

The nine-member Monetary Policy Committee held its key interest rate unchanged at 0.75 percent in line with economists' expectations. The stock of corporate bond purchases was kept at GBP 10 billion and that of government bond purchases at GBP 435 billion.

Brexit uncertainties have intensified considerably since the previous policy session and they are weighing on UK financial markets and on the near-term growth outlook, the bank said. The bank expects inflation to fall below 2 percent in coming months due to lower oil prices.

Policymakers also judged that the loosening of fiscal policy in Budget 2018, announced after the November Inflation Report projections were finalized, will boost UK GDP by the end of the MPC's forecast period by around 0.3 percent. The central bank reiterated that, were the economy to develop as projected in November and there is smooth adjustment to the possible Brexit outcomes, a margin of excess demand was expected to emerge. "In that context, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2 percent target at a conventional horizon," the bank said. The broader economic outlook will continue to depend significantly on the nature of Brexit, particularly the future trade relationship between the UK and the EU. "The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction," the bank said.