The Bank of England's (BoE) Monetary Policy Committee (MPC) decided to leave the benchmark interest rate unchanged at 0.1% following the November policy meeting. Although this decision was in line with the market consensus, market pricing was pointing out to a 50% chance of a 15 basis points rate hike.
Market reaction
With the initial market reaction, the British pound came under heavy selling pressure and the GBP/USD pair was last seen losing 0.75% on the day at 1.3580.
Follow our live coverage of the BoE policy announcements and the market reaction.
Key takeaways from policy statement as summarized by Reuters
"Policymakers vote 7-2 to keep bank rate at 0.1%."
"It will be necessary to raise bank rate over coming months if data, especially jobs, is in line with the forecast."
"MPC still sees value in waiting for official labour market data after end of furlough, before deciding on tightening policy."
"Policymakers vote 6-3 to maintain gilt purchase target at 875 bln stg."
"Policymakers vote 9-0 to maintain corporate bond purchase target at 20 bln stg."
"BOE maintains total asset purchases at 895 bln stg."
"Policymakers Ramsden and Saunders voted to raise rates to 0.25% from 0.1%."
"Will reinvest proceeds of maturing corporate bonds in november, taking into account climate impact."
"Supply-chain bottlenecks and signs of weaker consumer demand have lowered near-term growth outlook since August."
"UK growth forecast to be relatively subdued in 2023 and 2024, reflecting higher energy prices and less monetary and fiscal support."
"BOE estimates GDP growth of +1.5% QQ for Q3 2021 (Sept forecast: +2.1% QQ), sees +1.0% QQ in Q4 2021."
"BOE estimates quarterly GDP will return to Q4 2019 size in Q1 2022 (Aug forecast: Q4 2021)."
"BOE estimates GDP in 2021 +7% (Aug forecast: +7.25%), 2022 +5% (Aug: +6%), 2023 +1.5% (Aug: +1.5%), 2024 +1%, based on market rates."
"More workers on furlough at end of Sept than expected, few signs of redundancies, unemployment to rise slightly."
"Monetary Policy Report shows unemployment rate at 4.5% in Q4 2021 based on market rates (Aug forecast: 4.7%)."
"BOE forecasts inflation peak of 4.80% in Q2 2022 (Aug forecast: peak of 4.02% in Q1 2022)."
"Onflation forecasts do not factor in sharp fall in energy prices that markets expect in mid 2022."
"Upward pressure on CPI expected to dissipate over time as supply disruption eases, demand rebalances, energy prices stop rising."
"BOE forecast shows inflation in two years' time at 2.23% (Aug forecast: 2.07%), based on market interest rates."
"Inflation would be below 2% in Q4 2023 and Q4 2024 if market expectations of energy price falls and scale of boe rate rises both correct."
"Market interest rates imply more BOE tightening than in August, point to bank rate at 1.0% in Q4 2022, 1.1% in Q4 2023, 1.0% in Q4 2024 (Aug rate: 0.30% in Q4 2022, 0.57% in Q4 2024)."
"BOE forecast shows inflation in three years' time at 1.95% (Aug forecast: 1.89%), based on market interest rates."
"BOE estimates wage growth +3.5% YY in Q4 2021 (Aug forecast: +2.25%), +1.25% YY in Q4 2022 (Aug: +1.75%), +2.25% in Q4 2023 (Aug: +2.75%), +2.75% in Q4 2024."
"BOE estimates overall slack in economy is 0.25% of GDP in 2021 (Aug estimate 0.5%), sees excess demand of 0.25% in 2022 (Aug: excess demand 0.5%), excess demand of 0.25% in 2023 (Aug: excess demand 0.25%), slack of 0.25% in 2024."
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