Britain Keeps Surprising: Bank of England Elects to Keep Interest Rates the Same

Britain Keeps Surprising: Bank of England Elects to Keep Interest Rates the Same
June 9, 2016 admin

The United Kingdom, already riding record-low interest rates, decided to stand pat and keep interest rates unchanged this morning.

The nine member committee voted 8-1 to keep the interest rate at 0.5 percent. However, it seems that an interest rate change is now likely in August (although that is what they said about this month as well…).

A quote delivered to Bloomberg news reads:

“Most members of the committee expect monetary policy to be loosened in August,” officials said, according to the minutes of their July 13 meeting. “The committee discussed various easing options and combinations thereof. The exact extent of any additional stimulus measures will be based on the committee’s updated forecast, and their composition will take account of any interactions with the financial system.”

What this quote means is that instead of cutting rates now as a pre-emptive strike, the Bank of England will adopt more of a  “wait-and-see” approach and see what August’s inflation report reads.

Time will tell whether this was the right move, but it’s looking good so far.

The pound had an initial spike versus the other currencies in the hour following the announcement, but it quickly stabilized and is trading no more volatile than any other post-Brexit day.

Another popular opinion supporting the unchanged rate is how much of an impact the cut would actually have. Saying “cutting the interest rate in half” sounds good, and it shows the impression of progress, but the actual difference between .5 percent and .25 percent is so small that the difference isn’t actually noticeable.

So far, British authorities are applauding the move as a level-headed approach to rebuilding the British economy, however it remains to be seen how the rest of the world’s confidence in the U.K, will end up.

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