Investing.com – As expected, the Bank of England (BoE) decided on Thursday to hold interest rates steady at a record low as well as to make no changes to its asset purchase program.
Specifically, the BoE left the benchmark interest rate at a record low of 0.25%, in line with market forecasts.
Also as expected, the decision to maintain interest rates was undertaken in a vote with 7 members in favor and 2 opting for a rate hike.
The two hawkish members of the BoE’s Monetary Policy Committee (MPC) Michael Saunders and Ian McCafferty repeated their call for an increase in interest rates.
Furthermore, all MPC members agreed unanimously to leave its asset purchase program unchanged as expected at £435 billion ($574 billion) as well as to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion ($13.2 billion).
The minutes from the meeting showed that all members believe future rate hikes will be faster than markets are currently pricing in if economic conditions develop as forecast in August.
A majority of MPC members noted that “some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target.
They all agreed that any increases in interest rates would “be at a gradual pace and to a limited extent”.
“There remain considerable risks to the outlook, which include the response of households, businesses and financial markets to developments related to the process of EU withdrawal,” the BoE concluded, promising to respond to those developments as they affect the behavior of households and businesses, and the outlook for inflation.
Following the announcement, the pound strengthened. GBP/USD traded at 1.3297 from around 1.3205 ahead of the publication, EUR/GBP was at 0.8943 from 0.9012 earlier, while GBP/JPY traded at 146.98 compared to 145.81 before the announcement.
Meanwhile, European stock markets showed mixed trade. London’s FTSE 100 turned around on the news and was last down 0.46%. The Euro Stoxx 50 lost 0.21%, France's CAC 40 inched up 0.02%, while Germany's DAX fell 0.22%.