Bank of England Keeps Interest Rates At 0.1%pa

The Bank of England Monetary Policy Committee (MPC) met on Monday 2^nd November with the minutes of the meeting published today at 12 noon.

Despite the Government’s inflation target of 2%pa and latest Consumer Prices Index (inflation) at 3.1%pa (and the old measure: Retail Prices Index at 4.8%), the MPC voted by majority of 7-2 (the same as last month) to keep interest rates at 0.1%pa.

Many were expecting an interest rate increase but we reaffirm our position that the Bank of England is closely following the USA on monetary policy, keeping exchange rates stable to try and broker a trade agreement.

Following the Federal Reserve’s decision yesterday not to change rates but to taper back their quantitative easing programme, the Bank of England has maintained rates with the MPC also voting by majority of 6-3 to continue with its existing programme of UK QE at £20 billion per month, rising from £875bn to £895bn in total.

The Bank of England also highlighted that it expects inflation to rise to 5%pa in Spring 2022 and then to only start to gradually fall back to target growth of 2%pa in 2023, all spin in our opinion.  The Bank of England and the Government needs inflation to devalue public sector debt.

Comment

Unexpected by many but not by us.  We believe this reaffirms the real target is to devalue covid-19 debt over the next 10-20 years before it is due to be repaid but will add pressure on the Government for its RPI Index Linked Gilt debts.

The minutes also hint at a potential rise to c1.0% in 2022 but again, we suggest this could be a little more 'spin'.  Watch the US and that will give you a steer.