BoE keeps rates on hold; is QE on the cards?

Added 14th July 2016

The Bank of England’s monetary policy committee (MPC) has surprised commentators by voting 8-1 to keep interest rates on hold at 0.5%.

BoE keeps rates on hold; is QE on the cards?

However, minutes from the MPC meeting suggest that most members believe a cut will happen in its next meeting in August.

As discussed earlier this week, markets had overwhelmingly priced in a high chance that rates would be cut.

The FTSE 100 had surprised many with its strong run post the EU referendum vote on 23 June.

However, this 11-month high is unlikely to last with the main index having dropped off significantly this afternoon on the Bank of England’s announcement.

“The market had treated a Bank of England base rate cut as a foregone conclusion, following the dovish commentary in the aftermath of the UK’s vote to leave the EU,” said David Katimbo-Mugwanya, fixed income fund manager at EdenTree Investment Management.  

“Inaction by the Bank of England at this juncture seems to imply it wishes to make a more detailed assessment of the potential shock to economic growth, ahead of announcing any policy measures to mitigate a slowdown.

“These may well include further quantitative easing as early as next month, when the Bank releases new growth and inflation forecasts in its Quarterly Inflation Report.”

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Gary Shepherd

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Gary joined Last Word Media in 2009, becoming editor of Portfolio Adviser a year later. Previously, he worked at Incisive Media with roles across its Professional Adviser, Investment Week, Bloomberg Money and Mortgage Solutions titles. Gary has been shortlisted for various awards, winning Headline Money Investment Writer of the Year in 2010.

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