Bank of England policy makers indicated there’s still a chance of another rate cut this year as they assess the potential longer-term fallout from Britain’s decision to leave the European Union.
While the nine-member Monetary Policy Committee noted that recent near-term data had been stronger than anticipated since the Brexit vote, it couldn’t draw inferences for its longer-term forecasts. Officials said their view of the “contours of the economic outlook” hadn’t changed.
In its analysis, the MPC said if the outlook in November is “broadly consistent” with the projections published last month, when it announced a new stimulus package, “a majority of members expected to support a further cut in bank rate to its effective lower bound” later this year. The committee sees that lower limit at close to, but just above, zero.
The comments were published alongside the MPC’s latest policy decision on Thursday, which showed all members voted to keep the key interest rate at a record-low 0.25 percent. They were also unanimous on continuing with the purchases of gilts and corporate bonds unveiled in August.
With economic data since the U.K.’s June vote to quit the EU coming in better than expected, BOE officials led by Governor Mark Carney are taking stock after they responded to Brexit with an extensive package of measures, including the first rate cut in more than seven years.
The minutes of the latest meeting show some officials remain unhappy with the policy loosening. Kristin Forbes and Ian McCafferty, who voted against some of the measures in August, said the current outlook still didn’t fully warrant the new government-bond purchases. However, they didn’t vote against continuing the operation for now, given the “potential costs to the economy of immediately reversing the program.”
The BOE said evidence on the initial impact of its August stimulus is encouraging, noting narrower corporate-bond spreads, lower mortgage rates and gilt yields as well as an increase in asset prices.
“The committee would monitor closely changes in asset prices and in interest rates facing households and firms and their effect on economic activity,” it said.