Interest Rates and Monetary Policy: Data on interest rates from the UK, eurozone and the US; a summary of the Bank of England’s and international, quantitative easing policy.Jump to full report >>
Central banks around the world cut interest rates sharply during the 2007-2009 financial crisis. Rates have stayed at historically low levels since then, close to or below 0% in most developed economies.
The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to leave interest rates unchanged at 0.75% at its June policy meeting. Analysts are not expecting any rate changes over the next few months (at least), although the MPC noted “downside risks to [economic] growth have increased”.
In its May Inflation Report, the MPC upgraded its forecast for GDP growth in 2019 from 1.2% to 1.5%. It forecast that growth would begin to accelerate from 2020, up to 2.1% in 2021. This is assuming interest rates rise to 1.0% over this period (as markets currently expect). In turn, it expects the inflation rate to rise above its 2% target in 2021.
The Bank’s forecasts assume a smooth Brexit with an orderly transition to new trading arrangements between the UK and EU. The MPC states that the monetary policy response to Brexit will depend on the “form it takes”.
The MPC’s quantitative easing (QE) programme, where the Bank creates new money to buy financial assets, remains active and unchanged. QE totals £445 billion of assets, £435 billion of which are government bonds and £10 billion of commercial debt.
At its June policy meeting, the European Central Bank (ECB) left its main interest rate unchanged at 0.0%. It also pledged to kept rates unchanged until at least mid-2020 in response to weak economic data. New asset purchases under its quantitative easing programme ended in December 2018 and are worth a total of €2.6 trillion.
At its two-day policy meeting ending on 19 June, the Federal Reserve kept interest rates unchanged in a range of 2.25-2.50% but signalled that it could cut interest rates in the future given its less-robust prognosis for the US economy.