BoE: preparing policy like a Scout
- The BoE MPC voted unanimously in favour of no policy changes. Gilt purchases will continue at the same pace with a bias to slow later. Bank rate remains at 0.1%. Banks are instructed to prepare systems for a temporary negative rate environment.- Disagreement centred on whether instructing banks to rectify the operational hurdles to negative rates could occur without markets misconstruing it as an intent to deliver a cut. The tool will not be ready for at least six-months and remains unlikely even later.
- A cut would need to be operationally possible, with stimulus needed and no better way of delivering it. Disappointment in the recovery seems likely relative to the BoE’s bullish view of effectively no permanent damage, but supply destruction isn’t dovish.
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