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Bank of England interest rate decision

19 June 2020

As expected, the Bank of England’s (BoE) monetary policy committee decided on 18 June to leave rates on hold at 0.1%, just above the zero bound. In what are very difficult times economically for the UK, which has seen its economy shrink 20% in April alone, we now have real GDP stagnating way below the level seen during the global financial crisis to an almost unbelievable level last seen in July 2002, with the Covid-19 crisis erasing nearly 18 years of growth in just a few months.

While the BoE could have gone down the rabbit hole of negative policy rates, I feel that likelihood is still some way off (if at all) because the asset purchase stimulus still holds the dominant monetary firepower that the bank can deploy. The announcement to extend (to the end of 2020) and enlarge the asset purchases by another GBP 100 billion to GBP 745 billion was in line with expectations and certainly is not causing many fireworks to the up or downside in the currency markets.

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