The Bank of England's (BoE) Monetary Policy Committee (MPC) announced on Thursday it has set its monetary policy to meet the inflation target of 2% while helping the enhancement of economic growth and employment and therefore increased its bank rate by 0.25 percentage points to 0.5%.
In its February Monetary Policy Report, the committee decided the BoE should begin to reduce the stock of the British government's bond purchases through the issuance of central bank reserves and halting reinvesting maturing assets. It projected inflation will likely grow "to close to 6% in February and March, before peaking at around 7¼% in April," particularly due to the global crisis in energy demand and prices. It will then go down to slightly above 2% in two years and then under 2% in two to three years.
The committee also predicted the United Kingdom's gross domestic product (GDP) will return to its level before the COVID-19 pandemic by the end of the first quarter of the year. Moreover, it estimated the unemployment rate, which went down by 4.1% in the three months to November, will decline further in the forthcoming period and reach 3.8% in the first trimester.
