UK BOE Bank Rate* (Nov) 0.1% vs. Exp. 0.1% (Prev. 0.1%); decision unanimous (re. rates & and to increase purchases)

Economic Assessment

• A rapid increase in COVID-19 infections - All restrictions announced up to and including 31 October have been reflected in the Committee’s judgements. Beyond 2021 Q1, restrictions are assumed to be loosened. 
• Signs consumer spending has softened across high-frequency indicators
• The outlook for the economy remains unusually uncertain
• Household spending and GDP are expected to pick up in 2021 Q1, as restrictions loosen
• UK trade and GDP are also likely to be affected during an initial period of adjustment, over the first half of next year given Brexit. In the event EU trade negotiations do not reach an agreement the FX rate would probably fall and relative to the November projections CPI inflation was likely to be higher
• Risks to the near-term outlook for activity are judged to be skewed to the downside. The skew is somewhat smaller than was judged to be the case in August, however, as recent developments are consistent with some of the downside risks previously identified materialising.

Forward guidance

• The MPC will continue to monitor the situation closely.  If the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit.
• The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.

Negative rates

• Participants attach some weight to the possibility of a negative bank rate

Forecasts

• GDP: 2020 -11% (Prev. -9.5%), 2021 7.25% (Prev. 9.0%), 2022 6.25% (Prev. 3.5%), 2023 1.75%
• CPI: 2020 0.5% (Prev. 0.25%), 2021 2.0% (Prev. 1.75%), 2022 2.0% (Prev. 2.0%), 2023 2.0%
• Unemployment: 2020 6.25% (Prev 7.5%), 2021 6.75% (Prev. 6.0%), 2022 5.0% (Prev. 4.5%), 2023 4.25%
• The recovery takes time, however, and the risks around the GDP projection are judged to be skewed to the downside.
• In the MPC’s central projection, GDP does not exceed its level in 2019 Q4 until 2022 Q1 (Prev. end-2021). As a result, unemployment is elevated. The unemployment rate is projected to peak at around 7.75% in 2021 Q2, before declining gradually over the forecast period as GDP picks up

Link to MPR

Link to Summary & Minutes