Bank of England leaves rates unchanged – Business World

The British central bank, the Bank of England decided today to leave its key interest rate, the base rate, unchanged at 0.50 percent.

30 out of 54 surveyed economists in the Bloomberg survey had expected a rate cut to 0.25 percent. The remaining 24 economists expected an unchanged interest rate at 0.50 percent.

The market’s pricing indicated while 81 percent probability of a rate cut. That compares with 11 percent before the results of the referendum about the UK’s withdrawal from the EU.

The central bank announced at the same time that the program of asset purchases remains unchanged at 375 billion pounds, according to a unanimous decision, which was in line with most analysts’ expectations. Some analysts, however, had counted on increased asset purchases.

Members of the Bank of England voted in interest issue according figures 8-1 where a Member of Gertjan Vlieghe wanted to cut interest rates by 25 basis points. Expectations were that the poll would be 9 for lowered interest rate and 0 unchanged, according to Dow Jones Newswires.

The members made initial evaluations of the impact of the country’s withdrawal from the EU regarding demand, supply and the exchange rate. In the absence of further deterioration of the relationship between providing support for growth and bringing inflation to a sustainable level, expect most of the members that monetary policy will be easier in August.

The scope and design of the stimulus will be determined during the August review of forecasts and the inflation report, writes the Central Bank.

the markets are said to have functioned well after the announcement of Brexit referendum and the improved resilience of the financial system and the increased flexibility of the supervisory framework has softened the impact of the result.

Official statistics for the period after the vote is not yet available, but there are preliminary signs that the result has affected sentiment among households and businesses, where the sharp cases been made for the confidence.

Early indications and contacts suggest that some companies are starting to delay investment projects and delaying the decision anställningar.Bostadsmarknadsundersökningar also points to a significant deterioration of the expected activity. Taken together, these indicators suggest that economic activity is likely to weaken in the short term.

The sharp depreciation of the British pound in the short term, put upward pressure on inflation. It is expected to raise both import and commodity prices.

The Executive Board will consider the outlook for the economy has changed in light of the referendum to leave the EU and will present the findings of the Inflation Report on August 4th. The Board further state that they have a commitment to do whatever is needed to support growth and to bring inflation to the target at the appropriate time horizon.

“Most members of the Committee expect that the policy will be easier in August. the Committee discussed various relief options and combinations. the exact scope for further stimulus measures will be based on the Committee on updated forecasts and composition will take into account the interaction with the financial system, “it appears from the central bank announcement.