Bank of England reserved key interest rates unchanged

Bank of England interest rate

Bank of England interest rateBank of England reserved key interest rates unchanged at a historic low level of 0.5%. Eight of the nine members of the Monetary Policy Committee voted in favor of such a decision, but this slightly surprised analysts and market, as many economists expected decrease of the rate by 25 basis points. The Commission also remains the volume of its program of buying assets at the level of 375 billion GBP. However, Bank of England gave a clear signal that will lower interest rates at its next meeting on August 4, when Mark Carney will present the new macroeconomic forecasts. The latest forecasts of the institution are based on the assumption that UK remains in the EU.

“Committee members made an initial assessment of the implications of the vote of UK to leave the European Union on demand, supply and the exchange rate. In the absence of further deterioration of the balance between supporting growth and the return of inflation to sustainable levels, most members expect monetary policy to be relieved in August”, says the statement of Bank of England. “Monetary policy committee is determined to take whatever actions are necessary to support growth and to return inflation to the target level over an appropriate period of time. More committee members prefer easing in August. The Commission discussed various options and combinations. The exact scale of any additional incentives will be based on projections and renewed their formation will take into account all interactions with the financial system”, adds the central bank.

After the referendum for Brexit, Bank of England lowered its countercyclical capital buffer from 0.5% to 0% with immediate effect, as this level is expected to continue until at least June 2017. The decision dropped the regulatory capital buffers by 5.7 billion GBP, which will increase the capacity of banks to lend to businesses and households in the UK with up to 150 billion GBP.

From BoE indicated that data on economic activity after the referendum are not yet available, but preliminary indications that the results affect sentiment among households and companies, and some companies are beginning to postpone investment projects and solutions for personnel.

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