The Bank of England maintains its bond buying program at £895 million
On Thursday, the Bank of England (BOE) upgraded its UK economy outlook, but there is no rush to reduce the level of support it provides to help it recover from the Covid-19 crisis.
BOE also won unanimous 9-0 votes to maintain interest rates at 0.1% as expected, maintaining its bond buying program at £8950 billion.
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The UK Central Bank has focused on TP’s recent bond market divestment, suggesting that bond growth reflects an improved economic outlook.
“The development of global GDP growth (since the forecast in February) is a little stronger than expected, and the substantial US fiscal stimulus package should provide significant additional support for the outlook,” BOE said.
However, the bank added that the UK’s outlook is uncertain and will depend on the evolution of the pandemic and how different segments of the UK economy react as time goes on.
The BOE said the Monetary Policy Committee (MPC) is ready to “take additional steps necessary to achieve remittances” if the outlook for inflation weakens.
He added that he had no intention of strengthening monetary policy until it became clear that progress was being made to “eliminate reserve capacity and sustainably achieve the 2% inflation target.”
Laith Khalaf, a financial analyst at AJ Bell, has traced the BOE steps over the past few weeks, drawing the conclusion that things are looking up.
“From the beginning of last month, markets have been pondering when monetary policy could be strengthened as they worry about negative interest rates in the UK. The Bank of England in its February currency report We have provided a rather bullish assessment of the outlook for the economic recovery, and since then the outlook has improved even better,” Khalaf said.
“Additional support from the Prime Minister in the budget, a roadmap from the lockdown and fiscal stimulus from the US all support a robust bounce back case as the UK economy opens up in the coming months.”
Khalaf also turned his attention to the risk of rising inflation under the BOE’s current interest rate policy and the central bank’s approach.
“However, the message from the Bank of England is that despite the improvement in the economic situation, interest rates will remain glued to the floor for a foreseeable future. The only thing that may be praised upwards is that they will be the only ones that may be praised. It’s an inflation match, but it needs to be sustainable and structural to force the Bank of England to strengthen its policy.”
“Banks decide that there is only problem when inflation is close to full employment through rising inflation caused by temporary factors, such as energy prices recovery.
The FTSE 100 was held steadily today in the aftermath of yesterday’s announcement due to the US Federal Reserve and Bank of England updates.
