Recovery will take time, risks to GDP projection drift downward

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Following the BoE’s monetary policy announcement, the central bank has published the minutes of the meeting, with the highlights shown below (via Reuters):

Market participants grant some weight to the possibility of a negative bank rate.

The market path to interest rates is that they average zero over the forecast period.

The implicit market path for the bank rate has changed little since the August report, moving below zero during 2021.

It is expected that household spending and GDP rebound in the first quarter of 2021.

It is expected that the activity level in the first quarter remains significantly lower than in the fourth quarter of 2019.

UK trade and GDP are also likely to be affected during an initial period of adjustment.

During the remainder of the forecast period, GDP is expected to recover further.

But nevertheless, recovery will take time and risks around the GDP projection are considered to be biased downwards.

The committee will keep the purchase program under review of assets.

If the inflation outlook weakens, the committee is ready to take any further action that is necessary to achieve its mission.

The committee does not intend to tighten monetary policy at least until it sees clear evidence of significant progress in eliminating spare capacity and the inflation target is reached 2% sustainably.

Forecast of UK GDP at -11% in 2020 (August projection: -9.5%).

Forecast of UK GDP at 7.25 in 2021 (August projection: + 9%).

Forecast of UK GDP at 6.25% in 2022 (August projection: + 3.5%).

Forecast of UK GDP at 1.75% in 2023.

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Credits: Forex Street

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