The Bank of England (BoE) today revealed how their side is in reducing the economic stimulus given during the Covid-19 outbreak and at the same time plans to undertake policy tightening. However, for now, the BOE will still provide a full boost even with the surge in inflation.
Based on the minutes of the meeting, only one of the BoE’s policymakers, Michael Saunders, chose to reduce the volume of bond purchases. Finally, the BoE set out to keep its bond purchases unchanged at 895 billion pounds ($ 1.25 trillion). At the same time, the benchmark interest rate was also maintained at 0.1%.
With more than 70% of adults in Britain having received the vaccine fully then most restrictions have been lifted. By 2020, the UK has closed most of their economic sectors thus causing the economy to decline by 10%. But this year, the economy is starting to show a recovery, so the BoE plans to structure their economic stimulus when the time comes.
The BoE says it will start reducing its bond stocks when the policy rate reaches 0.5% by not reinvesting matured debt yields. The BoE will then consider actively selling the stock when its rate reaches at least 1%.
The Monetary Policy Committee says some moderate tightening of monetary policy is likely to be needed. At the same time, Bailey stressed the BoE would not hesitate to act if the inflation outlook was in jeopardy.
