BOE Minutes: Negative policy rates at this time could be less effective as a tool to stimulate the economy

The Bank of England's (BOE) Monetary Policy Committee (MPC) unanimously favored the no rate change decision at the end. However, details of the minutes are interesting to read.

Key quotes

MPC members Andrew Haldane voted against the proposition that the BOE should increase the target stock of purchased UK government bonds by an additional 100 billion sterling.

Companies, including financial institutions, rely on the smooth functioning of a set of important markets, such as corporate debt and equity markets to raise funds, and government bond and repo markets to meet their cash-flow needs.

The FPC welcomes the work by the Financial Stability Board (FSB) to undertake a comprehensive review of the provision of market-based finance in light of the Covid-19 shock. 

Most risks to UK financial stability that could arise from disruption to cross-border financial services have been mitigated, even if the current transition period ends without the UK and EU agreeing specific arrangements for financial services.

Risks to outlook skewed to downside.

BOE credit losses to be somewhat less than expected.

Market reaction

With the downbeat comments in the minute statement, GBP/USD fades upside momentum while stepping back from the post-BOE top of 1.3182 to currently around 1.3157.