The British interest rate decision in September maintained the benchmark interest rate at 0.25% and the current scale of QE unchanged. The current scale of central bank asset purchases remains at 435 billion, and the scale of corporate bond purchases remains unchanged at 10 billion pounds. But the possibility of another rate cut this year remains.

The Bank of England voted 9-0 to keep the benchmark interest rate unchanged at 0.25%. Most members of the Monetary Policy Committee (MPC) expect another interest rate cut during the year if the August outlook is confirmed in November. The Bank of England has two interest rate decisions this year, on November 3 and December 15 respectively. But the committee pointed out that the lower bound for interest rates is above zero.

The meeting minutes released by the Bank of England showed that although some recent economic indicators have been better than expected, the MPC's view of the economic prospects after the Brexit referendum has not changed. It is expected that inflation may reach the 2% target in the first half of 2017. The economic slowdown in the second half of the year may be stronger than previously expected.

The minutes of the meeting pointed out that the effect of the stimulus policy in August was encouraging, and mentioned the narrowing of corporate bond spreads, the reduction of loan interest rates and government bond yields, and the rise of asset prices. It also said, "The Monetary Board will pay close attention to changes in asset prices and lending rates, and their impact on economic activities." ”

However, Bank of England members Forbes and McCafferty, who voted against certain easing measures in August, still said that expanding the scale of QE is not necessary, but they did not vote against maintaining this scale this time because "monetary policies that change day by day may have an impact on the economy."

After the announcement of the Bank of England interest rate decision, the pound did not fluctuate much against the US dollar, and then fell slightly, currently down 0.32% to 1.3186. Due to the possibility of further interest rate cuts during the year, the decline in British 10-year government bonds narrowed.

In the previous interest rate decision in August, the Bank of England cut interest rates for the first time in seven years, lowering the benchmark interest rate by 25 basis points from 0.5% to 0.25% and expanding the scale of QE. After this, the recent economic data released were impressive, and investment banks such as Goldman Sachs and Morgan Stanley successively raised their UK economic growth forecasts.

Source: Wall Street Insights

Original title: The Bank of England remains on hold as scheduled but may further cut interest rates during the year