Bank of England nudges up inflation outlook, split over QE widens
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[September 23, 2021] By
David Milliken and Andy Bruce
LONDON (Reuters) -The Bank of England said inflation would rise above 4%
later this year, and two policymakers called for an early end to the
central bank's quantitative easing programme due to rising price
pressures.
Policymakers voted 7-2 to stick with the 895 billion pound ($1.2
trillion) asset purchase target they set in November 2020, when the
BoE's Monetary Policy Committee decided to buy a further 150 billion
pounds of government bonds over the course of 2021.
BoE Deputy Governor Dave Ramsden joined Michael Saunders in voting for
an early end to the programme of bond purchases.
The MPC voted unanimously to keep interest rates at 0.1%.
The BoE said it had revised down its expectations for the level of gross
domestic product in the third quarter by around 1% from the August
report, reflecting supply constraints.
But it said inflation would "temporarily" rise above 4% in the final
quarter of the year.
"Since the August MPC meeting, the pace of recovery of global activity
has showed signs of slowing. Against a backdrop of robust goods demand
and continuing supply constraints, global inflationary pressures have
remained strong and there are some signs that cost pressures may prove
more persistent," the BoE said.
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A street sweeper cleans outside the Bank of England as the spread of
the coronavirus disease (COVID-19) continues, London, Britain, March
31, 2020. REUTERS/John Sibley
Last month, the BoE said it expected the economy to regain its pre-pandemic size
in the final three months of 2021 and inflation to hit a 10-year high of 4% at
the same time.
British consumer price inflation hit a nine-year high of 3.2% in August, but the
rebound from the COVID-19 pandemic has slowed and some economists see a risk of
higher unemployment when furlough support stops at the end of this month.
Before Thursday's decision, interest rate futures priced in a more than 60%
chance of a rate rise to 0.25% in February next year, and a high chance of a
further rate rise to 0.5% by the end of 2022.
Most economists polled by Reuters earlier this month thought the BoE would raise
rates only once, relatively late in 2022.
($1 = 0.7300 pounds)
(Reporting by Costas Pitas, Guy Faulconbridge, Paul Sandle, William James;
Editing by Kate Holton and Hugh Lawson)
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