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BoE avoids negative interest rates but adds £100bn QE

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  • 18/06/2020
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BoE avoids negative interest rates but adds £100bn QE
The Bank of England (BoE) has not cut interest rates into negative territory but has signalled a significant expansion of its quantitative easing (QE) measures.

 

The bank’s Monetary Policy Committee (MPC) voted unanimously to hold rates at the all-time low of 0.1 per cent despite several suggestions from members that negative rates could be considered.

However, the central bank is increasing its QE asset purchase scheme by a further £100bn to help support the economy.

This is in addition to the £200bn of QE originally agreed with government under the coronavirus pandemic and takes the total stock of asset purchases to £745bn.

Santander UK chief economist Frances Haque said the decisions were largely expected.

“The MPC’s decision to leave Bank Rate unchanged at 0.1 per cent was expected this month, along with the decision to increase the amount of quantitative easing undertaken by the Bank of England,” she said.

“Although comments have been made in recent weeks by MPC members on the possible move to negative interest rates, making it clear that this is currently under review, any move will need to be accompanied by additional forward guidance.

“However, given the current state of the UK economy and how it will be able to recover from the restrictions of lockdown, there continues to be a significant possibility of further rate cuts as we move through the rest of 2020, if the economic data remains bleak.”

 

 

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