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  • Bank of England leaves bank rate unchanged at 0.10%
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07.05.2020, 06:15

Bank of England leaves bank rate unchanged at 0.10%

  • The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. In that context, its challenge is to respond to the severe economic and financial disruption caused by the spread of Covid-19.

  • At its meeting ending on 6 May 2020, the MPC voted unanimously to maintain Bank Rate at 0.1%.

  • The Committee voted by a majority of 7-2 for the Bank of England to continue with the programme of £200 billion of UK government bond and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, to take the total stock of these purchases to £645 billion.

  • Two members preferred to increase the target for the stock of asset purchases by an additional £100 billion at this meeting.

  • The spread of Covid-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world.

  • Activity has fallen sharply since the beginning of the year and unemployment has risen markedly.

  • Economic data have continued to be consistent with a sudden and very marked drop in global activity.

  • Oil prices have been volatile.

  • There have, however, been tentative signs of recovery in domestic spending in China, and this is likely to be echoed in other countries that have started to relax Covid-related restrictions on economic activity.

  • Financial markets have recovered somewhat over recent weeks and risky asset prices have picked up from their lows in mid-March. This in part reflects the actions taken by authorities in the United Kingdom and elsewhere. Global financial conditions have, nevertheless, remained tighter than prior to the outbreak of Covid-19.

  • The timeliest indicators of UK demand have generally stabilised at very low levels in recent weeks, after unprecedented falls during late March and early April.

  • Payments data point to a reduction in the level of household consumption of around 30%.

  • Consumer confidence has declined markedly and housing market activity has practically ceased.

  • CPI inflation declined to 1.5% in March and is likely to fall below 1% in the next few months, in large part reflecting developments in energy prices.

GBP/USD jumps to 1.2380 post-BoE announcement.

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