BoE remains optimistic about the economic recovery but with large dose of caution

The Bank of England, as expected, kept its benchmark interest rate at a record low and left unchanged the size of its 895 billion pound bond-buying program in its March policy meeting and said it planned to keep the pace of its purchases of government bonds steady at around 4.4 billion pounds per week.

Markets were more interested in central bank’s outlook for the economic recovery and BoE partially satisfied expectations by saying that Britain’s economic recovery was gaining pace on accelerating vaccination and that pandemic restrictions, which caused economic contraction in early 2021, could be lifted somewhat more rapidly than initially anticipated but pointed that the outlook remains unclear that dampens expectations for the start of gradual reduction of its huge stimulus.

The policymakers remain divided as central bank’s Chief economist Haldane expressed optimism and said that rapid recovery was more likely than not and said that consumers are ready to spend savings they amassed during the lockdown that would boost economic recovery.

On the other side, some MPC members were more concerned about the drag that Britain’s economy would face from its new, less open trading relationship with the European Union and a prospect of higher taxes after a short-term stimulus boost that would slow the economic recovery.

The comment from BoE’s Governor Andrew Bailey that his increased optimism came with a large dose of caution concluded the highlights from BoE’s meeting today.