The Monetary Policy Committee (MPC) of the Bank of England has decided to hold steady with a 0.5% Bank Rate. The MPC also voted unanimously to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.
The BOE stated there has been “mixed news” on prospects for global growth, echoing sentiments outlined by the US Federal Reserve at its most recent meeting. In the policy statement the BOE stated immediate downside risks around Chinese activity have lessened and in the United States, indicators of GDP growth in Q1 have been disappointing, but Q2 numbers appear more “encouraging”. The BOE said there were indications that investors have “regained their risk appetite” a bit but given weak supply growth, the MPC continues to expect global growth to be somewhat subdued by historical standards. The MPC pointed to the looming decision on the Brexit as raising “questions regarding whether the lower level of sterling will persist and its net economic impact.”
“The MPC won’t have lost sleep over today’s decision, which was in essence, a predetermined vote. Brexit and concerns over the UK’s economic health mean that rock bottom interest rates are here to stay. As far as savers are concerned, until the base rate overtakes the inflation rate they are still paying for the mistakes of the banks, meaning we are still to some extent in a financial crisis. Savers must rethink their savings plans and consider alternatives to make their money go a little further.”