BoE’s decision has turned out a little hawkish – Rabobank

The Bank of England has maintained its Bank rate unchanged at 0.1% and has announced an increase in the target of asset purchases, however, the Global Economics & Markets team at Rabobank considers that the BoE has tilted its message to the hawkish side.

Key quotes

“There was never any doubt that the Bank would maintain its benchmark rate at 0.10%, so the focus was mostly on the announcement regarding the Asset Purchase Facility. The consensus was for an increase of GBP 100bn, as ultimately happened, but the risk was skewed to the upside.”

“The MPC promises to stand ready to do more if necessary, but the ‘improved market functioning’ (i.e. higher risky asset prices and lower volatility) drove its decision to materially slow down the pace of gilt purchases from GBP 13.5bn/week to GBP 7bn/week.”

“The summary and the minutes contained no references to negative interest rates. According to Governor Bailey, speaking to reporters after the policy decision, ‘negative rates are not being used in what I might call the active policy discussion’.”

“As the policy response has already starts to taper, judging by the slowdown in asset purchases, the MPC apparently sees no need to seriously consider implementing something as controversial as negative interest rates.”