The Bank of England left interest rates and its target for bond purchases unchanged as the central bank focused on slowing growth and potential job losses over rising inflation.
The BoE’s monetary policy committee voted unanimously to leave interest rates at a record low of 0.1% and by a majority of 7-2 to continue with its £895bn programme of government bond purchases.
With inflation at 3.2% in August and expected to rise further, the BoE has come under pressure to tighten monetary policy by stopping bond purchases early.
The BoE said inflation was likely to exceed 4% in late 2021 but that the MPC believed the rise was transitory. The MPC is also concerned about the outlook for unemployment with the government’s furlough programme due to close at the end of September.
Amid signs of slowing global growth the BoE has revised down its estimate of third-quarter economic output by about 1% since its August report, leaving the expected level of GDP about 2.5% below its pre-pandemic level.
“All members in this group agreed that the outlook for the labour market, and hence underlying inflationary pressures, was particularly uncertain, and that some of this uncertainty should be resolved over coming months,” the BoE said.
