Slower pace of purchases

Firstly, the BoE’s Monetary Policy Committee (MPC) now expects that the quantitative easing (QE) programme will be completed "around the turn of the year", a new addition on the timeline. This means the pace of purchases is set to slow from current levels, although the minutes state the pace can be increased again if needed. This projected pace of purchases looks unlikely to offset the amount of additional debt issuance expected come from the Treasury later in the year.

Secondly, the vote for additional QE was not unanimous, with the Bank's Chief Economist Andy Haldane dissenting in favour of no change. The minutes acknowledged that the impact of the coronavirus crisis on Q2 growth is likely to be "less severe" than previously anticipated, which may have motivated Haldane's decision.

Uncertain outlook

Despite the more upbeat undertones, the MPC makes it clear that the outlook remains highly uncertain, with risks remaining skewed to the downside. This assessment is consistent with our outlook for a protracted recovery, with the uncertainty of Brexit yet again looming on the horizon.

In this respect, it is highly likely that the BOE will have to step in again to support the economy in the months ahead. Although Governor Bailey said at the press conference that negative rates or yield curve control were not discussed at the meeting, these options have not been explicitly ruled out. If further action is required in the future, in addition to upsizing the existing QE programme, we believe negative rates specifically remain a possibility.

Anna Stupnytska

Anna Stupnytska

Head of Global Macro and Investment Strategy