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Interest rates on hold

Time to think about your mortgage

The Bank of England (BoE) left interest rates unchanged following the latest meeting of its Monetary Policy Committee (MPC), amid signs of recovery from the country’s unprecedented economic slump.

At a meeting held on 17 June, the MPC voted unanimously to maintain the Bank Rate at a record low of 0.1%. In addition, BoE Governor Andrew Bailey confirmed that the prospect of taking rates below zero had not been discussed and again emphasised that any decision to move borrowing costs into negative territory was not in any way imminent.

The MPC did, however, approve a £100bn increase in the BoE’s quantitative easing stimulus package, which is designed to support financial markets and underpin economic recovery. One member of the MPC though did vote against this increase. This raised the total size of the Bank's asset purchase programme to £745bn.

Despite bolstering its firepower, the BoE actually signalled a slowdown in the pace of bond purchases by announcing that the latest £100bn injection will be spread across the remainder of the year.

The decision to reduce the pace of bond buying was taken because the Bank has. begun to see signs that the economy is contracting less severely than it previously feared. However, while the Bank is seeing some signs of recovery, Mr Bailey was at pains to stress it was too early to talk about the strength of any economic rebound and that the outlook remains unusually uncertain.

 Commenting on the prevailing economic conditions, the Governor said: “As partial lifting of the measures takes place, we see signs of some activity returning. We don’t want to get too carried away by this. Let’s be clear, we’re still living in very unusual times.”

Quilter Economic Review, June 2020