The Bank of England held interest rates steady on Thursday and mirrored the dovish tone set by the U.S. Federal Reserve on the prospect of future tightening of monetary policy.
The central bank's Monetary Policy Committee voted unanimously to keep its main lending rate at 0.1% and maintain its target stock of asset purchases at £895 billion ($1.2 trillion).
It comes as bond yields around the world have moved higher on expectations of rising inflation, and the possibility that central banks could tighten monetary policy sooner than expected. On Wednesday, however, U.S. Federal Reserve Chair Jerome Powell said the Fed does not intend to hike interest rates through 2023, and the Bank of England struck a similar tone Thursday.
"The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably," it said.
The BOE has cut rates twice since the onset of the pandemic from 0.75%, and deployed an unprecedented quantitative easing program, as it looks to steer the British economy toward recovery.
There has been growing speculation about a rate cut into negative territory. Last month, the BOE said British lenders would need at least six months to prepare for a negative interest rate environment, but stressed that it was not planning to deploy such a measure imminently.
Since the last meeting of the MPC, official figures confirmed that the U.K. economy suffered its largest annual contraction for more than 300 years in 2020. However, initial estimates showed GDP contracting by less than expected in January despite the country remaining in lockdown.
In its Budget earlier this month, the British government promised an expansion of its fiscal support to £407 billion in the short term, but mapped out a gradual unwinding of measures and tightening of the public purse.
The U.K. has also made significant progress on its rollout of Covid-19 vaccinations, with more than 24 million people having received at least one shot.
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