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Bank of England signals further rate cut this year

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Staff Writer | September 16, 2016
Bank of England
Britain   The Monetary Policy Committee retained its key bank rate

Bank of England policymakers voted unanimously to keep its key interest rate and asset purchases unchanged.

They were signaling that the rate could be cut further to its lower bound of just above zero, as recent data suggested that the economic shock caused by "Brexit" may be less severe than expected earlier.

The Monetary Policy Committee retained its key bank rate at a record low 0.25 percent, the government bond purchases at GBP 435 billion, and corporate bond purchases at GBP 10 billion, all three in a 9-0 vote in the policy meeting ended September 14. The decision was in line with economists' expectations.

Two policymakers, Kristin Forbes and Ian McCafferty, who had opposed increasing gilt purchases last month, still did not find the need for such a measure. However, they chose not to vote against the scheme this month, considering the potential cost to the economy of immediately reversing the ongoing programme.

"The Committee's view of the contours of the economic outlook following the EU referendum had not changed," the bank said.

"News on the near-term momentum of the UK economy had, however, been slightly to the upside relative to the August Inflation Report projections."

Policymakers will assess that news, along with other forthcoming indicators, during its November forecast round, the bank said.

"If, in light of that full updated assessment, the outlook at that time is judged to be broadly consistent with the August Inflation Report projections, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC's forthcoming meetings during the course of this year," the BoE said.

"The MPC currently judges this bound to be close to, but a little above, zero."

The next policy session is scheduled for November, when economists expect the bank to reduce to the interest rate to 0.10 percent, but refrain from boosting asset purchases.


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