On September 23, the Bank of England (BoE) decided to maintain its economic stimulus program and keep interest rates unchanged at a record low, but warned that inflation could exceed 4% this year.
|British Pound Sterling in London. Documentary photo: AFP/VNA|
The BoE’s post-meeting announcement to the members of the Monetary Policy Committee (MPC), the BoE’s policy-making body, voted unanimously to keep the borrowing rate at 0.1%. With 7 votes in favor and 2 against, policymakers also approved maintaining the quantitative easing stimulus program at nearly 900 billion pounds ($1.2 trillion).
According to the announcement of the BoE, the two MPC members want to stop the current asset purchase program as early as right after this meeting, instead of maintaining it until around the end of the year as currently planned. The BoE acknowledges that continuing to buy assets when inflation is above 3% and economic output recovers could boost inflation expectations further in the medium term.
The BoE also warned that inflation in the UK is expected to exceed 4% – more than double the target – in the fourth quarter of 2021 due to escalating energy and commodity prices. Britain’s inflation rate spiked year-on-year in August to a near-decade high of 3.2%, after the economy reopened after negative effects of the COVID-19 pandemic.
Britain’s central bank also warned that the economic outlook still faces significant uncertainties, including the government’s job support plan due to expire at the end of next week. Meanwhile, oil prices and sea freight costs are forecast to continue to increase. Gas prices are also increasing in all European countries.
The BoE’s decision comes as global central bank officials are grappling with determining when to pull back from their ultra-easy monetary policies and massive stimulus measures, as economies around the world continue to struggle. The economy devastated by the COVID-19 pandemic has begun to recover.