- Howard Archer from IHS Economics
Another calm and drowsy meeting from the Bank of England. Soon it will become a habit already, and investors will lose their interest in monthly meetings. The main reason for the disappointment is a lack of action. As it was widely expected, the BoE left its monetary policy unchanged in May, with analysts now focusing on the Inflation Report that will show revisions to the forward guidance, growth as well as inflation outlook. The report will be available for the public on May 14. In the meantime, the central bank left the interest rate at a record-low level, where the rate has been since March 2009, while the volume of asset purchases has been unrevised at 375 billion pounds. Despite the fact policymakers has been sitting tight on the monetary policy in the recent months, the pressure to start considering a change in course is constantly increasing, given the stronger-than-expected fundamentals, upgraded outlook and a massive pickup in the property prices.
While stronger activity in the housing market is contributing to growth, it is a great risk for the economy. The central bank does not have the appropriate tools to fix a supply issue, however, it can definitely restrict demand. The Bank of England is now expected to pull the trigger in the next few months in order to make affordability tests more stringent.
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