Provided by: Bank of England
Official Release: Statement

From the Release: "The Committee noted that the outlook for economic activity was dominated by two countervailing forces. The process of adjustment in train in the UK economy, as private saving rises and banks restructure their balance sheets, combined with weak global demand, will continue to act as a significant drag on economic activity. But pushing in the opposite direction, there is considerable economic stimulus stemming from the easing in monetary and fiscal policy, at home and abroad, the substantial depreciation in sterling, past falls in commodity prices, and actions by authorities internationally to improve the availability of credit. That stimulus should in due course lead to a recovery in economic growth, bringing inflation back towards the 2% target. But the timing and strength of that recovery is highly uncertain.

In the light of that outlook and in order to keep CPI inflation on track to meet the 2% inflation target over the medium term, the Committee judged that maintaining Bank Rate at 0.5% was appropriate. The Committee also agreed to continue with its programme of purchases of government and corporate debt financed by the issuance of central bank reserves and to increase its size by £50 billion to a total of £125 billion. The Committee expected that it would take another three months to complete that programme, and it will keep the scale of the programme under review."

Provided by: Bank of England
Official Release: Statement

The Bank of England kept rates at 0.50%, pausing a rate cutting campaign that has seen rates go down from 5% to 0.50% since October. The bank indicated that it will keep buying government bonds to fight the recession. The bank says that it will take another two months to finish purchasing the 75 billion pounds of assets. Rates are probably not going to go lower until those purchases are finished and the bank takes stock of how their various programs are filtering down into the broader economy. There has been some positive data coming out of the UK recently including better than expected figures from the Manufacturing and Services PMI's along with a slight pickup in mortgage lending and approvals. Still, unemployment is climbing, like it is in most of the developed countries. 

Provided by: Bank of England
Previous Release: Statement

From the Release: "The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.5 percentage points to 0.5%, and to undertake a programme of asset purchases of £75 billion financed by the issuance of central bank reserves.

World activity continued to weaken, reflecting both depressed confidence and the persistent problems in international credit markets.  In the United Kingdom, output dropped sharply in the fourth quarter of 2008.  That reflected lower consumer spending, a further fall in business investment and a rapid run-down in stocks, in part offset by stronger net exports as the past depreciation of sterling began to take effect.  Business surveys continue to point to a similar rate of contraction in the early part of this year.  Unemployment has risen markedly.  Credit conditions faced by companies and households remain tight...

To that end, and noting the recent exchange of letters between the Governor and the Chancellor of the Exchequer concerning the use of the Asset Purchase Facility for monetary policy purposes, the Committee agreed that the Bank should, in the first instance, finance £75 billion of asset purchases by the issuance of central bank reserves.  The Committee recognised that it might take up to three months to carry out this programme of purchases.  Part of that sum would finance the Bank of England’s programme of private sector asset purchases through the Asset Purchase Facility, intended to improve the functioning of corporate credit markets.  But in order to meet the Committee’s objective of total purchases of £75 billion, the Bank would also buy medium- and long-maturity conventional gilts in the secondary market.  It is likely that the majority of the overall purchases by value over the next three months will be of gilts."

Provided by: Bank of England
Official Release: Statement

The bank of England cut rates by another 50 basis points today, extending its aggressive attempt to bring down borrowing costs. Within the last 5 meetings, starting in October, rates have dropped by 400 basis points in order to counter what is becoming a very severe recession. The UK economy is expected to shrink this year, and with the interest rate at historic lows, the government and the central bank have to try other methods to jumpstart lending and spending. The government has given the BOE the power to spend up to 50 billion pounds on bonds and commercial paper in an attempt to inject liquidity into the financial markets. 

From the Release: "The global economy is in the throes of a severe and synchronised downturn...

In the United Kingdom, output dropped sharply in the fourth quarter of 2008 and business surveys point to a similar rate of decline in the early part of this year. Credit conditions faced by companies and households have tightened further. The underlying picture for consumer spending appears weak. Businesses have responded to the worsening outlook by running down inventories, cutting production, scaling back investment plans and shedding labour.

CPI inflation fell to 3.1% in December. Pay pressures have diminished. But sterling has continued to depreciate, boosting the cost of imports...

At its February meeting, the Committee noted that, although the transmission mechanism of monetary policy was impaired, the past cuts in Bank Rate would in due course nevertheless have a significant impact. Together with the recent easing in fiscal policy, the substantial fall in sterling and past falls in commodity prices, that would provide a considerable stimulus to activity as the year progressed. Nevertheless, the Committee judged that there remained a substantial risk of undershooting the 2% CPI inflation target in the medium term at the existing level of Bank Rate. Accordingly, the Committee concluded that a further reduction in Bank Rate of 0.5 percentage points to 1.0% was warranted this month." 

The Pound moved slightly higher against the Dollar and rose more strongly against the Euro. Usually interest rate cuts would indicate a weakening of a currency, but these are not ordinary times. Instead traders may be focused on the swift action by the bank as a good sign in that they are pulling out all stop to get the economy moving again, whereas the ECB is waiting until next month to lower theirs. The government is also stepping up fiscal packages to try and shore up the economy. The Pound may also be benefiting from a unlikely string of better than expected fundamental news, including manufacturing and services activity, mortgage lending data from last week, and a rise in housing prices according to the Halifax Bank of Scotland. After the Pound hit a 23-year low against the Dollar and a record low against the Yen, it has been trading stronger as traders may be inclined to think that it hit an important bottom there.

Provided by: Bank of England
Official Release: Statement

The Bank of England cut its benchmark interest rate by 50 basis points to 1.5%, as was expected by a consensus of economists. That follows a 100 basis point cut on December 4th. Trying to grapple with a world economy that is undergoing an unusually sharp and synchronized downturn, the central bank faces an economy with very weak business and consumer confidence at the same time that world trade has receded. With expectations of lower inflation ahead the central bank deemed it necessary to lower borrowing costs to their lowest rate since the bank was founded in 1694 in order to prop up the ailing economy. Some traders though the bank may move with an even more aggressive cut, and when the 50 basis point decision came in the Pound gained. Expectations are that the bank will cut rates below 1% by the second quarter, and will have to resort to non-conventional monetary policy techniques such as quantitative easing in order to dig the UK economy out of its recession.

From the Release: "At its January meeting, the Committee noted that the recent easing in monetary and fiscal policy, the substantial fall in sterling and the prospective decline in inflation would together provide a considerable stimulus to activity as the year progressed. Nevertheless, the Committee judged that, looking through the volatility in inflation associated with the movements in Value Added Tax, there remained a significant risk of undershooting the 2% CPI inflation target in the medium term at the existing level of Bank Rate. Accordingly, the Committee concluded that a further reduction in Bank Rate of 0.5 percentage points to 1.5% was necessary to meet the target in the medium term."

Minutes for Meeting Held on December 3 & 4
Provided by: Bank of England
Official Release: PDF

Today's minutes revealed that the Bank of England voted unanimously to cut the benchmark interest rate to 2% from 3% this month. Though they seemed open to the idea of an even bigger cut, there was worry over how the currency markets and financial markets would react to such a move. It could have resulted in an "excessive" drop in the Pound and undermine confidence in the economy. 

From the Release: "The Committee considered the policy decision in the context of how the medium-term outlook for inflation had changed since the November Inflation Report. There had been several major pieces of news including: consistent indicators of the weakening of near-term output growth in the United Kingdom and overseas; the continuing fall in oil and other commodity prices; the fall in the yield curve alongside a significant depreciation of sterling; and the publication of the Pre-Budget Report (PBR). This news had been in the context of continuing dislocations in many financial markets that were constraining the ability of the banking sector to lend to households and to the corporate sector. Overall, the medium-term outlook for inflation appeared to have shifted downwards since the November MPC meeting...

Taking all the news together, the Committee agreed that a significant margin of spare capacity would open up over the next couple of years. Abstracting from the volatility induced by the change in the VAT rate, it was most likely that, without further policy action, inflation would substantially undershoot the target in the medium term. It was therefore necessary to make an immediate cut in Bank Rate and the question was how large that reduction should be.

The Committee agreed that, given the significant probability of undershooting the inflation target in the medium term, a cut of at least 100 basis points was needed. The Committee discussed whether a larger cut was warranted. That might be justified by the scale of the downside risks to inflation. A number of arguments were, however, advanced against a larger cut, to which different members attached different weights. Financial markets had priced in a cut of 100 basis points and there was a risk that going further could cause an excessive fall in the exchange rate. There was also a risk that an unexpectedly large cut could undermine confidence in the economy more widely."

Provided by: Bank of England
Official Release: Statement

The Bank of England met expectations of a 100 basis point cut. The statement said policy makers were not as worried about inflation as weaker domestic demand outweighed any upside risks from a reduction in the banchmark interest rate and the depreciation of the Pound. With growth deteriorating sharply, the BOE moved to slash rates again aggressively, hoping to filter down the lower borrowing costs to consumers and potential home buyers. 

From the Release: "The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 1.0 percentage points to 2.0%.

In the United Kingdom, business surveys have weakened further and suggest that the downturn has gathered pace. Consumer spending and business investment have stalled, while residential investment has continued to fall. Activity indicators in the rest of the world have also weakened, though the further depreciation in sterling should moderate the impact of weaker global growth on the United Kingdom. And a number of fiscal measures to boost near-term demand are in train, both in the United Kingdom and overseas. Despite the actions taken to raise bank capital, ease funding and improve liquidity, conditions in money and credit markets remain extremely difficult. The Committee noted that it was unlikely that a normal volume of lending would be restored without further measures."

Minutes for Meeting Held on November 6th
Provided by: Bank of England
Official Release: PDF

Meeting minutes today showed that the Bank of England considered an even bigger reduction in the benchmark interest rates than the 1.5% cut they announced on November 6th. In the end the Monetary Policy Committee voted 9-0 to lower rates to 3% from 4.5%. With inflation falling rapidly as a result of a fall in commodity prices and weak economy, the Bank felt it had to act aggressively to stimulate lending and meet the inflation target in the future, from a fear of undershooting it in this environment. They did not want to spook markets, or hurt their credibility in the markets, and decided on the smaller reduction. With CPI falling by its biggest amount in 11 years today, the Bank is likely to cut rates again at its next meeting. One upside risk to inflation is the decline in the value of the Pound.  

Provided by: Bank of England
Official Release: Statement

The Bank of England took drastic action on Thursday and slashed its benchmark rate by 150 basis points or 1.5%, from 4.50% to 3.0%. The economy is facing a potential severe and long-lasting economic contraction and with the bank's inflation fears easing, they took bold action to try and free up lending. Such a big move should give banks the chance to pass on a noticeable amount of the cut to their consumers, and help unfreeze lending. 

From the Release: "Since the beginning of the year, the Committee has set Bank Rate to balance two risks to the inflation outlook. The downside risk was that a sharp slowdown in the economy, associated with weak real income growth and the tightening in the supply of credit, pulled inflation materially below the target. The upside risk was that above-target inflation persisted for a sustained period because of elevated inflation expectations. In recent weeks, the risks to inflation have shifted decisively to the downside. As a consequence, the Committee has revised down its projected outlook for inflation which, at prevailing market interest rates, contains a substantial risk of undershooting the inflation target. At its November meeting, the Committee therefore judged that a significant reduction in Bank Rate was necessary now in order to meet the 2% target for CPI inflation in the medium term, and accordingly lowered Bank Rate by 1.5 percentage points to 3.0%."

Provided by: Bank of England
Official Release: Statement

The Bank of England acknowledged that the economy has deteriorated substantially the past months and that inflation was going to rise above 5% in the months to come. However, action was needed in order to unfreeze markets. Still, the bank is coupling its rate cut with an effort to recapitalize major UK bank. It is offering an unprecedented 50 billion pounds in emergency loans. It will also offer to buy preference shares from Royal Bank of Scotland, Barclays, and at least six other banks, providing about 250 billion pounds of loan guarantees to refinance debt. Bank stocks have been savaged the past week, with some losing nearly half their value in a week. 

From the Release: "The Committee remains focussed on setting Bank Rate in order to meet the 2% inflation target. In doing so it continues to balance two risks. On the downside, there is a risk that a sharp slowdown in the economy, associated with weak real income growth and the tightening in the supply of credit, pulls inflation materially below the target. On the upside, there is a risk that above-target inflation this year and next raises inflation expectations so that inflation persists above the target for a sustained period. During the past month, the balance of those risks to inflation in the medium term has shifted decisively to the downside. In the light of that outlook, the Committee judged at its October meeting that an immediate reduction in Bank Rate of 0.5 percentage points to 4.5% was necessary to meet the 2% target for CPI inflation in the medium term."

Minutes for meeting held on 3 & 4 September
Provided by: Bank of England
Official Release: PDF

The Bank of England votes 8-1 to hold rates steady in September, with David Blanchflower the only member arguing that a rate cut was necessary in order to pull the economy out of a recession. His logic is that the deteriorating economy will act to restrain demand and push inflation below 2%. Inflation had jumped to 4.7% in August. The other members seeing a rise in prices did not want to show the market any weakness or take a knock on their credibility in the face of higher inflation. 

From the Release: "For most members, as there had been news this month for inflation prospects on the upside as well as on the downside, a reduction in Bank Rate now might suggest that the Committee put undue weight on activity indicators, signaling some slackening in the MPC's commitment to meet the inflation target in the medium term. Most members judged that maintaining Bank Rate at 5% this month was necessary if inflation was to be brought back to the target in the medium term. That would continue to balance the upside and downside risks to inflation appropriately."

Provided by: Bank of England
Official Release: PDF

The bank of England kept rates steady at 5% after concluding their meeting today. Despite all kinds of signs of an economy reeling in 2008, the Bank is on guard against high inflation, which has not come down to a sufficient level for the bank to act with any kind of loosening of monetary policy. The Government acted to try and stimulate the housing sector by suspending a tax on some home purchases and pledged to accelerate 1 billion pounds of spending. Still GDP remains stagnant, and the central bank predicts will grow about 0.2% on an annualized basses in the first quarter of 2008.  

The GBP/USD was up for the day, and held its advantage following the relase. It trades above 1.78 in early NY trading. 

Minutes for meeting held on 6 & 7 Aug
Provided by: Bank of England
Official Release: PDF

The BoE minutes showed that 7 members of the MPC voted for an maintaining the bank rate, 1 for a rate hike, and 1 for a rate cut. The minutes showed increasing uncertainty about the situation of inflation, though the on balance there are still upside risks. Although oil prices declined, utility prices have surged and may reverse the downside effects of oil on inflation. The main concern of inflation is in its potential effects on wage price setters. At this point, the bank has the finger on the trigger to pull for a rate cut, only to be deterred by persistent inflation.

The question is how much spare capacity is needed to effect prices. A move in any direction when data is creating more uncertainty would be like throwing dice with the stakes increasing. The bank feels that the rate cut needs to follow some stabilization of prices because it would be doubly difficult to raise rates back up if inflation continues.

From the Release: "Most members of the Committee judged that the current stance of monetary policy was broadly appropriate and that Bank Rate should be maintained at 5% this month. Inflation was likely to move further above the target in the coming months. The outlook for activity growth had continued to worsen, but some build up in the margin of spare capacity was likely to be necessary to ensure that inflation returned to the target in the medium term.

For one member of the Committee, the risk of inflation being more persistent than in the central projection was sufficient to warrant an immediate increase in Bank Rate. Although there were considerable downside risks to growth, particularly those arising from the tightening of credit conditions, a pre-emptive increase in Bank Rate would help to keep inflation expectations anchored to the target and lessen the need for more restrictive policy in the future.

For another member, the downside risks to activity growth were greater than the majority view expressed in the Inflation Report. For this member, there was less risk of inflation being persistent and more risk of undershooting the inflation target in the medium term, because of rapidly slowing activity, so an immediate cut in Bank Rate was warranted."

Minutes for meeting held on 9 & 10 July
Provided by: Bank of England
Official Release: PDF

The members of the Monetary Policy Committee surprised expectations and were split 3 ways. Seven members voted to hold rates steady, David Blanchflower called for a reduction, while Timothy Besley voted to increase rates, the first to do so in about a year. Blanchflower sees weak growth ahead and wants to soften borrowing costs while Besley believes higher inflation and the Committee's credibility is at stake if the Bank does not raise rates to battle inflation.

From the Release: "For all members of the Committee, the decision was a difficult one. There was a range of views about the weights to place on different arguments. But all members agreed that, relative to the central projection in the May Inflation Report, the path of inflation in the near term would be higher and the slowdown in activity more pronounced. The discussions and analysis in the forthcoming Inflation Report forecast round would help to shed more light on the implications of these developments for the inflation outlook in the medium term.

For one member, the arguments in favour of raising Bank Rate this month were most telling. While acknowledging the downside risks to activity from the energy shock and credit crunch, an immediate increase in Bank Rate was needed to keep medium-term inflation expectations anchored and ensure the Committee’s credibility in light of the current and prospective increase in CPI inflation.

For another member, the news on the month had reinforced the case for an immediate reduction in Bank Rate in order to avoid inflation undershooting the target in the medium term. The activity data had been uniformly gloomy and broad-based and activity now seemed likely to contract sharply in the near term, possibly for several quarters. Long-term inflation expectations remained contained and domestically generated inflation remained low. As a result, there was little or no likelihood of a rise in wage growth. So it continued to be important to look through the short-term spike in inflation."

Pound Gains on Meeting Minutes: The Pound rose on the back of the meeting minutes, even as two pieces of fundamental data were weak. The GBP/USD jumped 100 pips during the European trading session, reclaiming some of its losses yesterday.

EUR/GBP - Pouns Surges 80 Pips vs Euro on Central Bank Outlook: With the Euro weaker and the Pound stronger, the Euro-Pound pair slid 80 pips to test 0.7850. This is a 5-week low for the pair, as it broke below key resistance of 0.79.

The Minutes from the interest rate decision to hold showed that there were too much uncertainty. Clearly, inflation has ticked up in the short-term and threatnes to breach 4.0% this year. Also, the slowdown continues, but with speckles of surprises such as better than expected retail sales, the depth and breadth of the slowdown remains hard to judge. These developments broached a rate hike proposal to the discussions, but most policy members feel that trying to bring down inflation that way would be too much economic stress.

The minutes revealed that the bank is mainly concerned with inflation as it is clearly rising. Inflation expectations, as well as interest rate expectations have risen and adds more pressure for the bank to raise rates. At least a rate cut is off the table. From the release:

Most members concluded that developments this month had meant that the risks to inflation in the medium term had moved further to the upside. It was possible that a somewhat greater degree of slack would now be necessary to ensure inflation returned to the target. As a result, there was no case for a reduction in Bank Rate this month, although that position could change as information about the path of activity and inflation accumulated in the coming months.

Minutes for meeting held on 7 & 8 May
Provided by: Bank of England
Previous Release: PDF

The BoE minutes showed that 8 policy members voted for the hold, with only Blanchflower voting for a quarter point cut. He believes that the price increases are not within the MPC's control. However the latest inflation data weighed heavily on the marjority of the members that are concerned with second-round inflation. From the minutes:

For most members, a reduction in Bank Rate this month would make it more difficult to keep inflation expectations in line with the target. CPI inflation was already at 3% and the Committee expected it to rise further in the near term. Although economic activity was likely to slow, the Committee had judged that some slowing in the growth rate of output was likely to be necessary for inflation to settle close to the target around two years ahead. A further reduction in Bank Rate this month could create the impression that the Committee was trying to stabilise output growth rather than maintaining its focus on the inflation target.

Provided by: Bank of England
Official Release: PDF 

The Bank of England policy makers split into 3 camps during the last meeting. David Blanchflower called for a more aggressive 50 basis point cut, while two members, Andrew Sentance and Timothy Besley thought no change was necessary. The other 6 members voted for a 25 basis point gradually paced cut as they were moved by deteriorating condition in global credit markets and the effect that had on investment spending by businesses, mortgage lending by banks and spending by individuals and households. The bank cut rates despite high inflation in the short term.

The minutes show a bank willing to take its time as it lowers rates, which pressured the Pound during today's session. The bank will most likely cut rates by 25 basis points when it meets in June.