UK Central Bank Holds Key Interest Rate Steady: "No Intention to Tighten Monetary Policy"

Maintaining Asset Purchases Worth ?895 Billion
"Stimulus Continues Until Clear Evidence of Sustained Inflation Target Achievement"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The Bank of England (BOE), the central bank of the United Kingdom, announced that it will keep the base interest rate unchanged at the current 0.1% and maintain the asset purchase program at its current level. This is interpreted as a policy intention to maintain stimulus measures until clear signs of economic recovery emerge, in line with the monetary easing stance of the U.S. Federal Reserve (Fed).

According to foreign media such as CNBC, on the 18th (local time), the BOE unanimously decided at its monetary policy meeting to keep the base interest rate at the current 0.1% and maintain the asset purchase program at the current scale of ?895 billion (approximately 1,408 trillion KRW). The BOE emphasized, "We have no intention to tighten monetary policy until there is clear evidence that production capacity has fully recovered and the 2% inflation target is consistently achieved."

Along with this, the BOE stated, "The economic outlook has improved due to the U.S.'s $1.9 trillion stimulus package and the easing of COVID-19 related lockdown measures," adding, "In particular, the new U.S. stimulus package will provide significant additional support to the global economic outlook."

The BOE's decision to maintain its monetary policy is interpreted as a policy intention to continue monetary easing in line with the Fed's announcement a day earlier to maintain the current zero interest rate until 2023. Bloomberg News analyzed, "While the market is focusing on the possibility of a sharp rise in inflation, central banks are trying to soothe market concerns with the message that there is no need to change monetary policy."

Previously, the Bank of England had responded to the economic shock caused by the COVID-19 pandemic by lowering the base interest rate twice from 0.75% to a historic low of 0.1% and implementing an unprecedented asset purchase policy.