View of The Royal Exchange, Bank of England, and City of London during an overcast day.
LONDON On Thursday, the Bank of England maintained its monetary policy unaffected and downgraded economic growth projections in the third quarter of 2011.
The BOE's policymakers voted unanimously for its main interest rate to remain unchanged at 0.1%, a new record low. They also opted to keep its asset purchase goal of 875 billion ($1.2 Trillion).
However, the case for tightening policy seemed to be gaining momentum as Michael Saunders and Deputy Governor Dave Ramsden voted for an early termination of the BOE’s program for government bond purchases.
The August report showed that the central bank had revised down its expectations for U.K. GDP growth in the third quarter to 2.1%. This is a decrease of 2.9%. According to the central bank, this downgrade was partly due to "the emergence a few supply constraints on output."
According to the updated forecast, third quarter GDP would be 2.5% lower than its pre-Covid peak.
The BOE issued a warning about inflation. It stated that consumer prices would rise to "slightly more than" 4% in 2019, double its target, due to the increasing energy price shock.
The BOE stated in its report that "the material rise in spot and forward wholesale gasoline prices since August Report represents an upside threat to the MPC’s inflation projection starting April 2022."
"Most of the other indicators of cost pressures remain elevated. The Committee continues to believe that the current global cost pressures are temporary.
According to the central bank, rising gas prices pose a "significant upside threat" to its inflation forecast. It warned that inflation could stay above 4% through the second quarter next year.