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UOB Group’s Economist Lee Sue Ann reviews the latest monetary policy event by the Bank of England (BoE).

Key Quotes

“As expected, the Bank of England (BOE)’s monetary policy committee (MPC) judged that the existing stance of monetary policy remains appropriate.”

“Perhaps the key takeaway from the latest meeting is that the BOE is not unduly fazed by either the rise in bond yields or the noticeable increase in rate hike expectations that have occurred over recent weeks.”

“The economic outlook for the rest of this year is highly dependent on the speed of the vaccine campaign, as well as on the emergence of new variants of the virus that may require the imposition of a more prolonged series of restrictions.”

“Meanwhile, the expiry of the VAT cut to hospitality businesses should see inflation rising in April, although we expect headline inflation to remain below the Bank of England (BOE)’s 2% target over the next couple of years. This lack of significant inflationary pressures will provide room for further monetary policy if needed to support the economic recovery.”

“An accommodative monetary policy is likely to see the BOE’s policy rate kept at current level with further quantitative easing (QE) announced later this year. We do not expect interest rates to begin normalising before the end of 2022, whilst any downside could see the policy rate cut to zero alongside further increases to the scale of the ongoing QE programme.”