Bank of England keeps policy unchanged, warns of 'more pronounced' period of inflation

cnbc ^ | AUG 5 2021 | Elliot Smith

[BenLurkin]

The Bank of England left its monetary policy unchanged on Thursday, but warned of a more pronounced period of above-target inflation in the near term.

Policymakers unanimously decided to keep the Bank's main lending rate at a historic low of 0.1%, where it has been since March 2020, and voted 7-1 to maintain the quantitative easing program at £895 billion ($1.25 trillion).

The MPC said it intends to begin reducing its stock of purchased assets when the bank rate has risen to 0.5%, given the appropriate economic circumstances, by ceasing to reinvest in maturing U.K. government bonds. This is a substantially lower threshold than the 1.5% bank rate earmarked in June 2018.

In its policy report, the committee forecast that its main interest rate would reach 0.5% in the third quarter of 2024, after hitting 0.2% in the third quarter of 2022 and 0.4% for the same period in 2023.

"This implies it now expects the next policy tightening cycle to be far more gradual — and to a lower end-point — than in the past," said Vivek Paul, U.K. chief investment strategist at BlackRock Investment Institute.