LONDON (MNI) – The Bank of England Monetary Policy Committee issued
the following statemnt following its decision today to increase its
Asset Purchase Facility by stg75bn.
A full text of the statement follows:
“The Bank of England’s Monetary Policy Committee today voted to
maintain the official Bank Rate paid on commercial bank reserves at
0.5%. The Committee also voted to increase the size of its asset
purchase programme, financed by the issuance of central bank reserves,
by stg75 billion to a total of stg275 billion.
“The pace of global expansion has slackened, especially in the
United Kingdom’s main export markets. Vulnerabilities associated with
the indebtedness of some euro-area sovereigns and banks have resulted in
severe strains in bank funding markets and financial markets more
generally. These tensions in the world economy threaten the UK recovery.
“In the United Kingdom, the path of output has been affected by a
number of temporary factors, but the available indicators suggest that
the underlying rate of growth has also moderated. The squeeze on
households’ real incomes and the fiscal consolidation are likely to
continue to weigh on domestic spending, while the strains in bank
funding markets may also inhibit the availability of credit to consumers
and businesses. While the stimulatory monetary stance and the present
level of sterling should help to support demand, the weaker outlook for,
and the increased downside risks to, output growth mean that the margin
of slack in the economy is likely to be greater and more persistent than
previously expected.
“CPI inflation rose to 4.5% in August. The present elevated rate of
inflation primarily reflects the increase in the standard rate of VAT in
January and the impact of higher energy and import prices. Inflation is
likely to rise to above 5% in the next month or so, boosted by already
announced increases in utility prices. But measures of domestically
generated inflation remain contained and inflation is likely to fall
back sharply next year as the influence of the factors temporarily
raising inflation diminishes and downward pressure from unemployment and
spare capacity persists.
“The deterioration in the outlook has made it more likely that
inflation will undershoot the 2% target in the medium term. In the light
of that shift in the balance of risks, and in order to keep inflation on
track to meet the target over the medium term, the Committee judged that
it was necessary to inject further monetary stimulus into the economy.
The Committee therefore voted to increase the size of its asset purchase
programme, financed by the issuance of central bank reserves, by stg75
billion to a total of stg275 billion. The Committee also voted to
maintain Bank Rate at 0.5%. The Committee expects the announced
programme of asset purchases to take four months to complete. The scale
of the programme will be kept under review.
“The minutes of the meeting will be published at 9.30am on
Wednesday 19 October 2011″.
–London newsroom: 4420 7862 7492; email: ukeditorial@marketnews.com
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