Bank of England maintains stock levels of government and corporate bonds


By Flora McFarlane.

The Bank of England’s Monetary Policy Committee (MPC) has voted to maintain the stock of government bond purchases at £435 billion and corporate bond purchases at £10 billion, and to as hold the bank rate at 0.25%

The MPC voted unanimously on both decisions to maintain the stock of sterling non-financial investment-grade corporate bond purchases, and the stock of UK government bond purchases. The eventual unwinding of the BoE positions will have a significant impact on market liquidity.

The MPCs assessment of the outlook for inflation and activity in the August Inflation Report is similar to that in May, while CPI inflation rose as expected to 2.6% in June from 2.3% in March, with the Committee forecasting higher inflation, peaking at about 3% in October.

In his press conference, the governor of the Bank of England, Mark Carney, referenced the process of Brexit as a key factor in the uncertainty of the UK economy.

The outlook for supply in the economy is a significant element that will affect economic growth, with the supply capacity expected to expand at only modest rates, which is a notable reason for the absence of change in rate and bond stock levels.

Sterling fell against the dollar and the euro on the announcement, while yields on the 10-year UK government bond also fell lower after the news.

©TheDESK 2017