BoE hikes to 0.75% and avoids the pitfall of waiting for more certainty

BoE policymakers voted unanimously to increase the Bank Rate to 0.75%. T here was also a unanimous vote to maintain the target for gilt purchases at £435bn and for corporate bond purchases at £10bn. In the press conference, t he governor expressed the MPC’s view that it would be a mistake to keep on waiting for more certainty and indicated that interest rates would remain as high as now for a w ide range of Brexit outcomes. Also, the Bank’s response to a WTO-style Brexit outcome would d epend on the due securing of a transition period . The BoE expects the economy to have zero slack in Q3 and sees a small margin of excess demand emerging by late- 2019, which should build thereafter ( reaching 0.25% and 0.5% of potential growth in Q3 2020 and Q3 2021 respectively ) as the economy continues to expand above its reduced rate of potential growth of 1.5%. Subsequently, the BoE saw a modest ongoing tightening as warranted should the economy continue to develop broadly in line with Bank’s projections, yet stressed that any future rate increases would be “ at a gradual pace and to a limited extent ” , adding in the press conference that the policy should “walk, not run”. The BoE said the best it can do for households is to maintain inflation close to the target.