Bank Of England Keeps Stimulus On Hold

Bank of England kept its asset purchase program at £375 billion and maintained its interest rate at 0.5%.

It will publish review on forward guidance on August 7, with the inflation report.

This was in line with expectations.

In the July MPC statement we received a strong hint that any announcement on forward guidance would come with the inflation report on chancellor George Osborne's insistence.

In a note published ahead of the BoE announcement, Societe Generale's Brian Hilliard pointed out that if we do get forward guidance it will be "state-contingent" guidance.

"The fact that the Chancellor’s request was framed in terms of assessing the merits of using intermediate thresholds being reached for some particular economic indicator points to the “state-contingent” approach being favored by the MPC."

The consensus is that unemployment rate or nominal GDP growth are the top contenders for the choice of the threshold.