The Bank of England kept interest rates unchanged and cut the forecast for economic growth

The Bank of England announced that it will keep interest rates at a record low of 0.1%, which all 9 committee members unanimously gave their votes for. It was also unanimously decided to keep the volume of bond purchases at £895 billion. Going forward, the committee leaves the doors open for rate cuts if necessary. All decisions fully meet the expectations of economists.

Economic growth forecasts were lowered. The monetary regulator expects GDP to contract in the first quarter after the UK government tightened restrictions to prevent the spread of COVID-19. For the whole of 2021, the forecast for GDP growth was also revised downward to 5% from 7.25% three months earlier.

In the regulator statement, it’s indicated that the banks may prepare for negative interest rates. However, Andrew Bailey was quick to reassure that this point isn’t a signal for the market. The monetary regulator hints that this is possible in the future, but there is no such need for it in the immediate future. Negative interest rates are being considered, but a multi-tiered lending system is being developed to apply them. A similar program has been implemented in the ECB, according to which individual credit institutions can avoid negative rates.

Sterling jumped as the market doesn’t see the integration of negative rates anytime soon. The options market has cut rates for an additional cut of interest on lending in half. After the announcement of the decision, the pound reached 1.3650. At the time of writing, the sterling was trading higher around 1.3678. Gilts' yield increased sharply by 46 basis points and comes up to 0.418%.

by Justforex, 2021.02.04

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Open Account

Get Free Analytics

* required fields
Last Articles
All Articles
Best Gold Trading Tips For Beginners
Gold is one of the most popular assets traded worldwide by investors, funds, and speculators who aim to profit from the price fluctuations or stand up against inflation. Unfortunately, many market participants fail to catch the wave and take full advantage of what the gold market can offer due to the lack of knowledge and experience. Are you planning to become the next gold trader? Learn how to trade gold in the most profitable way.
Read more
How to Become a Successful Forex Trader in Malaysia
With broad access to online brokerage services, everyone can become a trader these days. However, few people actually find success in FX. The reason might be that many of those who try trading skip some essential steps or simply do things wrong. Learn about the best ways to become a currency trader in Malaysia from this article.
Read more
How to Become a Forex Trader in Indonesia
Starting trading currencies in Indonesia is as easy as in the rest of the world. All you need to do is spend a few minutes of your time on opening a trading account and going through the verification process. However, this is hardly enough to start making money, let alone make a living out of forex trading. To learn about the best ways to trade currency in Indonesia, read this article.
Read more