BOE announces its September monetary policy decision - 23 September 2021

  • Prior 0.10%
  • Bank rate vote 9-0
  • Gilts purchases £875 billion
  • Corporate bond purchases £20 billion
  • Total asset program £895 billion (unchanged)
  • Gilts purchases vote 7-2 (Saunders and Ramsden dissented)
  • UK Q3 GDP expectations revised down by around 1% since August
  • Downward revision reflects emergence of supply constraints on output
  • Estimate of underlying pay growth has picked up, to above pre-pandemic rate
  • Uncertainty around labour market outlook has increased
  • Questions on how things will be after furlough program ends at the end of Sept
  • BOE will deliberate said developments in November
  • Inflation to rise further in near-term, to slightly above 4% in Q4
  • Central expectation is that current elevated cost pressures will prove transitory
  • Existing stance of monetary policy remained appropriate
  • Full statement

In terms of overall key messaging, I don't see much change in the language - if any at all. The BOE remains cautious about the labour market outlook until the expiry of the furlough scheme at the end of this month while they are also continuing to suggest that inflation is 'transitory' - even if it is expected to rise to above 4%.

They are also less bullish on the economy, with supply bottlenecks and capacity constraints starting to weigh on the outlook for the most part.

That is arguably a key reason why they will continue to maintain that inflation is 'transitory', to steer clear of any misconstrued message that they will not support the recovery.

Besides all of this, the more hawkish part of the meeting is that Ramsden has now joined Saunders in dissenting on QE and arguing for bond purchases to be reduced from its current pace of £875 billion to £840 billion.

Adding to that is this passage on the bank rate (bolding the relevant):

All members in this group agreed that any future initial tightening of monetary policy should be implemented by an increase in Bank Rate, even if that tightening became appropriate before the end of the existing UK government bond asset purchase programme.