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Azad Zangana, European Economist at Schroders

Bank of England on hold

Thu, 02/08/2012 - 13:30

Azad Zangana, European Economist at Schroders, on the Bank of England’s decision to leave interest rates at 0.5%…

The Bank of England's Monetary Policy Committee decided to leave interest rates at the record low level 0.5%, and its asset purchase programme (or quantitative easing programme) at GBP375 billion. Having only just increased its quantitative easing programme by £50 billion last month, there was little chance of more action from the Bank, despite the dreadful second quarter GDP figures published last week. 

The Bank of England will publish its updated forecast fan-charts for growth and inflation next week in its Inflation Report, which will provide markets a signal of the prospects for more quantitative easing, or even a further cut in interest rates, as has been called for by the IMF. However, we expect the Bank of England to remain in 'wait and see' mode, especially as it will want to assess the impact of the government's 'Funding for Lending Scheme', which started this week.


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