BOE announces its latest monetary policy decision - 5 November 2020
- Prior 0.10%
- Bank rate votes 0-0-9 vs 0-0-9 expected
- Gilts purchases £875 billion vs £825 billion expected
- Prior £725 billion
- Corporate bond purchases £20 billion
- Total asset program £895 billion
- There are signs consumer spending has softened
- There is judged to be a material amount of spare capacity in the economy
- Outlook for the economy remains unusually uncertain
- Stands ready to increase QE again if market functioning worsens
- Recovery will take time with risks skewed to the downside
- Agreed to increase QE to meet inflation target in the medium-term
- If inflation outlook weakens, BOE stands ready to take necessary additional action
- Does not intend to tighten policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably
- Full statement
In terms of the economic outlook, the BOE sees Q4 GDP sliding back into contraction with activity only set to pick up again in Q1 2021.
I reckon the market is liking the hard-line that the BOE is taking with their approach above. They delivered more than what was expected as the consensus was for a £100 billion increase in gilts purchases, so that reaffirms their commitment to the economy.
Also, they steered away from any major talk on negative rates so that pretty much leaves the status quo for the most part. On their outlook for the economy, they are less optimistic but the commitment to do more is what the market is focusing on now.
The pound is getting a lift from the report, with cable jumping from 1.2940 to 1.3000.