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BOE remained monetary policy unchanged

At meeting this Thursday the BOE remained its current monetary policy unchanged. It was not unexpected for markets.


Major part of the BOE’s Government kept its position to remain interest rates at 0.5%, because maintaining of the current monetary policy allows economy to strengthen steadily, and 2% inflation will be reached in two years.


Growth index of annual inflation was near zero in August. In opinion of the bank’s experts, situation is expected to be improved in 2016, but in Q1 index will be, at least, below 1%.  


Only Ian McCafferty called to raise rates to 0.75%. Amount of asset purchase facility was remained at 375 billion pounds or 571 billion dollars.


These decisions were adopted in a time of economic slowing in the country, though in the first half of the year it was a growth of economy. Services index, which takes ¾ of GDP significantly lowered in August. Manufacturing suffered from expensive pound global economic recession that caused reduction of demand and export of goods and services.


In covering speech Marc Carney reiterated that bank’s member would examine question about possible increase of rates, at least, by the end of the year, and they would have more information to adopt this decision.


However, there is an opinion that this step will not be adopted even in late-2016. This opinion is supported by rates on derivatives, which are connected with the benchmark interest rates.  The second reason to doubt increase of rates is Fed’s policy. Increase of rates in the US is gradually delaying, while the BOE bases its steps on Fed’s decision.