Bank leaves QE untouched ahead of forward guidance

The Bank of England’s Monetary Policy Committee (MPC) elected to keep asset purchases and the bank lending rate the same as all eyes turn to the inflation report next week.

The report, which will be published on August 7, will “respond to the chancellor’s request for its assessment of the use of thresholds and forward guidance,” alongside the standard inflation projections, the MPC said in a statement.

Forward guidance, which is used in the US, is an attempt by central bankers to calm markets by giving advance warning as to when the bank is planning to change its monetary policy, by tying it to something quantifiable.

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There has been speculation that in the report the MPC could commit to keeping interest rates at their historically low levels until employment rises to a predetermined level.

The MPC voted to keep asset purchases at £375bn, and the bank rate at 0.5 per cent. Minutes of the meeting will be published on August 14.

The news comes after the preliminary estimate of first quarter GDP revealed the economy grew by 0.6 per cent, while manufacturing in June expanded at its fastest rate in two years.

The European Central Bank will provide its own interest rate decision later on today.