Interest rates have remained at this record-low level since March 2009. The MPC also chose to keep the size of the asset purchase facility at £375bn.
Kames Capital’s fixed income manager John McNeill, said the announcement that accompanies the inflation report on 7 August will be one to watch: “This is expected to outline a new regime for UK monetary policy, is likely to include forward guidance on future rate policy and may also include further credit easing measures.”
Meanwhile, Schroders’ European economist, Azad Zangana, said we were yet to see the monetary activism promised when Mark Carney took office as governor of the Bank of England last month.
The rate hold comes at a time of an improving economic backdrop in the UK. Last week the UK GDP figure for Q2 showed growth of 0.6%, while this morning showed the Markit Purchasing Managers’ Index (PMI) for manufacturing activity rose to its highest level since March 2011, building on last month’s positive figure.
“Looking ahead we expect forward guidance on interest rates to be introduced in the near future along with scenario analysis to explain how the Bank of England would react if the economy was to surprise significantly on the upside or downside,” Zangana said.
“At the juncture, given the improvement in economic activity, we do not expect the bank to add any additional stimulus, at least, not without any other significant slowdown or rising risk of recession. Given the sever headwinds the UK economy faces, those downside risks are by no means gone. However, we expect a cautiously more optimistic tone from the new governor at his inflation report debut,” he added.
