Business

Bank of England holds stimulus despite soaring inflation


By AFP
Published : 24 Sep 2021 09:42 PM

The Bank of England on Thursday left its record-low interest rate and vast stimulus unchanged, despite warning that inflation would rise more than expected this year on soaring energy costs.

The BoE opted against following the US Federal Reserve, which on Wednesday indicated it would soon start tapering its own emergency aid.

The BoE's nine-strong monetary policy committee (MPC) voted unanimously to hold its key borrowing cost at 0.1 percent, a statement said.

Policymakers voted 7-2 in favour of keeping the bank's quantitative easing (QE), or asset-buying stimulus, at almost o900 billion ($1.2 trillion, 1.0 trillion euros).

However, developments over the past month had "strengthened" the case for some tightening of monetary policy in the medium term, according to the minutes from the gathering.

- 'Considerable uncertainties' -

The BoE warned that "considerable uncertainties remain" over the outlook, including the end of the UK government's furlough jobs support scheme next week.

Global central banks are grappling with when to withdraw ultra-loose monetary policy and massive stimulus as Covid-blighted economies start to recover.

While BoE tapering could still be some time off, the bank indicated following its latest regular meeting that two of its policymakers "preferred to stop the current asset purchase programme as soon as practical" rather than continuing it until around the end of the year as planned.

"Continuing with asset purchases when CPI inflation was above 3.0 percent and the output gap was closed might cause medium-term inflation expectations to drift up further."

Central banks have embarked on huge purchases of commercial bonds, resulting in massive cash amounts swirling around the world economy.