Investing.com – As expected, the Bank of England (BoE) decided on Thursday to keep interest rates unchanged at a record low as well as stand pat on its asset purchase program, though a majority of members expect a further rate could at one of this year's meetings.
Specifically, the BoE left the benchmark interest rate at a record low of 0.25%, in line with market forecasts.
The decision to maintain interest rates was undertaken in a unanimous vote.
Furthermore, the Monetary Policy Committee (MPC) also voted unanimously to leave its asset purchase program unchanged as expected at £435 billion.
Similarly, the MPC voted unanimously to continue with the program of sterling non-financial investment-grade corporate bond purchases totaling up to £10 billion, financed by the issuance of central bank reserves.
According to the minutes, the BoE felt that the evidence on the initial impact of the policy package announced in August is encouraging, but promised to closely monitor changes in asset prices and in interest rates facing households and firms and their effect on economic activity.
The MPC also noted that a number of near-term indicators of economic activity had been somewhat stronger than expected and thus now expects “less of a slowing in U.K. GDP growth in the second half of 2016.”
"It was more difficult to draw a strong inference from these data about the Committee’s projections for 2017 and beyond," the minutes explained.
"Moreover, there had been no new information since the August Inflation Report relevant for longer-term prospects for the UK economy," the document added.
Additionally, the BoE noted that the August inflation data was well below the 2% target, but forecast it to return to that level in the first half of 2017.
The minutes further revealed that the MPC’s economic outlook remained unchanged despite the fact that news on the near-term momentum of the British economy had been slightly to the upside.
The MPC further indicated that it would continue to evaluate forthcoming indicators during the November forecast round and, if the data comes in line with its expectations, a "majority of members" expect to support a further cut in the interest rate toward the lower bound “at one of the MPC’s forthcoming meetings during the course of this year.”
“The MPC currently judges this bound to be close to, but a little above, zero,” the minutes concluded.
In an immediate reaction, GBP/USD traded at 1.3242 from around 1.3239 ahead of the release of the data, EUR/GBP was at 0.8487 from 0.8492 earlier, while GBP/JPY traded at 135. compared to 135.63 before the report.
Meanwhile, European stock markets traded with mixed signs. London’s FTSE 100 gained 0.25%, the Euro Stoxx 50 inched down 0.03%, France's CAC 40 lost 0.11%, while Germany's DAX traded up 0.20%.
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