MPC in 'wait and see mode' - ITEM Club comments on today's interest rate decision

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s interest rate decision:

  • With MPC members currently in ‘wait-and-see mode’, we weren't expecting any change in monetary policy this month
  • While we strongly support the Bank's recent initiatives, the lack of credit demand may force the Bank to authorise more QE later in the year

“After authorising further asset purchases of £50bn in June, we weren't expecting any change in monetary policy this month. Having taken a number of policy initiatives over the past couple of months, MPC members are now in ‘wait-and-see mode’ to judge how they feed into the UK economy.
“We have been advocating looser monetary policy for a while now and strongly support the Bank's recent initiatives to increase the flow of credit. However most of the Bank's policies are aimed at increasing credit supply, by lowering banks' borrowing costs and increasing the amount of liquidity available to them. While low credit supply is one of the reasons contributing to low levels of lending in the UK, a lack of demand for credit is playing a major role as well. In order to address this issue, the Bank may find that they need to increase QE further later in the year.”