At 19:00 Beijing time on Thursday, the Bank of England announced the latest interest rate resolution, keeping the benchmark interest rate unchanged at 0.1%, with 7 votes in favour and 1 vote against keeping the total asset purchase scale unchanged at 895 billion pounds, in line with market expectations.
The most striking new development of the meeting was that the Bank of England indicated that it was ready to withdraw from quantitative easing when the benchmark interest rate reached 0.5%, which was much earlier than the previous guideline of 1.5%. In addition, the Bank of England unexpectedly revised its inflation expectations, predicting that inflation would soar to 4% in the fourth quarter and then fall back to close to the target level.
At the same time, the bank acknowledged that some tightening policies are needed in the foreseeable future. Foreign media said that this is a real signal, and it is looking forward to the setting of an exit period from the epidemic.
After the announcement of the interest rate resolution, sterling rose 40 points against the US dollar in the short term, and it is currently around 1.3930; The yield of the 10-year Treasury note of the United Kingdom rose, currently around 0.515%, rising 2.5 basis points in the day.
Latest resolution content
In the latest interest rate resolution, the Bank of England maintained the purchase scale of corporate bonds at £ 20 billion and the purchase scale of government bonds at £ 875 billion, but said that it may be necessary to slowly tighten the policy in the expected period. When the bank interest rate rises to 0.5%, if the economic situation is taken into consideration, the Committee intends to reduce the stock of purchased assets by initially stopping reinvestment in British government bonds. The interest rate threshold has been lowered. The previous target interest rate was 1.5%.
In terms of economic growth, the GDP growth rate has increased. The Bank of England predicts that GDP will reach the pre epidemic level in the fourth quarter of 2021, and the future GDP growth rate is expected to slow down to a more normal level. At the same time, it raises the GDP growth rate in 2022 to 6%, and in May this year, it is expected to be 5.75%; Britain's GDP will grow by 1.5% in 2023, and it is predicted to grow by 1.25% in May.
On the unemployment rate, the unemployment rate is expected to be lowered. The Bank of England lowered its forecast for the unemployment rate in 2021 to 4.75%, and it was expected to be 5% in May this year; The unemployment rate is expected to be lowered to 4.25% in 2022 and 4.5% in May this year.
According to the forecast of the monetary policy committee, the inflation rate will fall to 2% by the end of 2023.
In general, the MPC believes that idle capacity has been eroded in the past few quarters because demand has exceeded the growth of effective supply. Friction in the labor market may dissipate during the forecast period, thus boosting growth, which is not conducive to supply capacity. However, there are uncertainties in these judgments, including how the economy will adapt to the end of the vacation plan.
The Bank of England warned that monetary policy would need to be tightened due to soaring inflation
Bank of England officials predict that the inflation rate will exceed 4% later this year. They believe that it is necessary to take some "moderate tightening measures" at an appropriate time to control the price rise.
Some members believe that the guiding conditions for tightening monetary policy have been met. Among them, Bank of England member Sanders explicitly opposes maintaining the bond purchase target.
The surge in inflation after the outbreak of the epidemic has made people pay more attention to the prospect of central banks around the world tightening their policies, although most people insist that the surge in inflation is temporary. Although the Bank of England agrees, its assessment of the peak is much higher than the 3% forecast in May.
The Bank of England's position remains consistent with the shift in Global Hawks. Previously, the New Zealand Central Bank indicated that it might even raise interest rates; Clarida, vice chairman of the Federal Reserve, also said that he would start to reduce debt later this year.
Most officials maintain the dove faction
As the former chief economist Haldane left office, his successor has not been announced. In this resolution, the number of members of the British monetary policy committee is temporarily reduced from the usual 9 to 8. Most people have made it clear that this is not the time to withdraw from the stimulus plan.
Bank of England governor Bailey said earlier that overreacting to the temporary strong growth and inflation may damage the economic recovery. Jonathan, a member of the Bank of England? Haskell also warned that in the foreseeable future, "austerity policy is not the right policy".
Bank of England governor Bailey: there are good reasons to believe that inflation above the target is temporary
At 20:00 this evening, Bank of England governor Bailey held a press conference.
At the press conference, Bailey said that Britain's GDP would return to the level of 2019 by the end of this year. He believed that the inflationary pressure would be reduced, and there was sufficient reason to believe that the inflation above the target would be temporary. But if the economy grows as expected, some modest tightening may be needed. When the market operates normally, the monetary policy committee will sell treasury bonds.
Bailey stressed that the Bank of England will take action after the bank interest rate rises to 0.5%. If the bank insists on the 1.5% interest rate threshold to cancel quantitative easing, it is equivalent to saying that the Bank of England will never do so. If the economy suffers a negative impact after the Bank of England starts to reverse the quantitative easing policy, it may restart the quantitative easing policy.
Current epidemic situation in Britain
Due to the successful promotion of the vaccination program, various risks surrounding the delta virus are receding. The United Kingdom announced earlier that the restrictions on COVID-19 would be lifted on August 9, and the isolation measures for passengers from France, India and other places were lifted on Wednesday local time. Economic activities in the United Kingdom are rapidly rebounding.