The Bank of England’s (BOE) Monetary Policy Committee (MPC) decided to leave the benchmark interest rate unchanged at 0.10% at its November policy meeting. During the same meeting a decision was reached to expand the Quantitative Easing (QE) program by £150 billion from £725 billion. This is move is intended to safe guard the economy from collapsing during the ongoing fight against the novel coronavirus. The UK is currently grappling with new lockdown measures.

Key takeaways from the policy statement.

MPC agreed to increase the target stock of purchased the UK government bonds by an additional £150 billion in order to meet the inflation target in the medium term, taking the total stock of government bond purchases to £875 billion

Market contacts expected the MPC to announce an extension to the asset purchase programme at its November meeting of around £100 billion.

As of 4 November, total stock of assets held in the asset purchase facility had reached £717 billion, an increase of £272 billion as part of the combined £300 billion programmes of asset purchases announced on 19 march and 18 June.

Announcing further asset purchases now should support the economy and help to ensure that the unavoidable near-term slowdown in activity was not amplified by a tightening in monetary conditions.

The Bank is avoiding reducing interest rates into the negative territory. The fears are possibly arising from the fact that such a policy has failed to stimulate inflation in other economies were it has been implemented.

Market reaction

The Pound rallied against major currencies as the Bank of England OE abstains from the much dreaded negative interest rates. The GBPUSD rallied from the support region around 1.2974 to trade above the key psychological level of 1.3000.