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Bank of England interest rate decision is in

Bank of England interest rate decision is in

Bank of England interest rate decision is in There were no surprises today as the Bank of England announced its decision on interest rates moments ago – keeping the existing rate unchanged.

There was widespread dismay in an insurance industry already rocked by low interest rates when rates were further slashed to a new record low of 0.25% in August. The move was part of a post-Brexit stimulus package with the Bank indicating that another rate cut would likely be implemented later this year.

However, that cut will not be in September – with most analysts suggesting that November is the likely date if indeed another cut is implemented. However, even that now seems to be in doubt.

The latest economic data appears to show that the UK has weathered the Brexit storm – so much so that Andrew Sentance, the former Bank of England policymaker, told Bloomberg TV this morning that the Bank had played its card prematurely. Figures on retail sales, also released today, showed only a minor fall of 0.2% in August from what was seen as a bumper July, placing them well ahead of expectations. The UK economy, it appears, has bounced back – albeit long-term questions still remain.

Here is part of the statement from the Bank of England:

“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.  At its meeting ending on 14 September 2016, the MPC voted unanimously to maintain Bank Rate at 0.25%.  The Committee voted unanimously to continue with the programme of sterling non-financial investment-grade corporate bond purchases totalling up to £10 billion, financed by the issuance of central bank reserves.  The Committee also voted unanimously to continue with the programme of £60 billion of UK government bond purchases to take the total stock of these purchases to £435 billion, financed by the issuance of central bank reserves.

“The package of measures announced by the Committee at its August meeting led to a greater than anticipated boost to UK asset prices.  Short and long-term market interest rates fell notably following the announcement;
corporate bond spreads narrowed, and issuance was strong; and equity prices rose.  Since then, some of the falls in yields have reversed, driven by somewhat stronger-than-expected UK data and a generalised rise in global yields.
“Many banks announced cuts in Standard Variable Rate and Tracker mortgage rates in line with the cut in Bank Rate.  Deposit rates fell in August, although on average these falls were slightly smaller than the cut in Bank Rate.  Fixed rates on new mortgage lending also fell. 

“Overall, while the evidence on the initial impact of the policy package is encouraging, the Committee will monitor closely changes in asset prices and in interest rates facing households and firms and their effect on economic activity.”