United Kingdom: MPC relaxes amid some promising signs

March’s MPC meeting proved predictably uneventful. Monetary policy was left unchanged, while the committee was relaxed about the recent rise in bond yields and the medium-term outlook for inflation. The MPC did offer a more upbeat tone on prospects for the economy, and the latest high-frequency data revealed some positive developments. But the fiscal cost of lockdown was clear in another month of massive borrowing in February.

What you will learn:

  • The committee saw no need to change policy, keeping Bank Rate at 0.1% and the target for asset purchases at £895bn.
  • Some positive developments since the MPC’s previous meeting in early February were reflected in March’s policy statement.
  • January’s fall in GDP had been smaller than expected, and the government’s roadmap for reopening the economy implied restrictions being lifted more rapidly than the MPC had anticipated.
  • Measures announced in March’s Budget would deliver a significant near-term fiscal loosening. 

Topics: United Kingdom, Bond yields, Interest rates, MPC

United Kingdom: MPC relaxes amid some promising signs