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The Bank of England left their benchmark rate unchanged at 0.50% as expected, but in an unusual statement following the non-action said that they would leave their asset purchase program at £125 billion.

The Bank of England left their benchmark rate unchanged at 0.50% as expected, but in an unusual statement following the non-action said that they would leave their asset purchase program at £125 billion. The central bank will review their quantitative easing efforts at their August policy meeting when they will release their quarterly inflation report. The MPC has maintained that inflation which stands at 2.2% will fall and remain below its 2% target for the remainder of the year. Indeed, the Halifax June reading for home prices showed the first decline in three months of 0.5% as banks continue to be reluctant to lend which is curbing demand. There has been considerable thawing in credit markets since the height of the crisis but they have yet to reach levels that will facilitate sustainable growth. Therefore, we could see the BoE add to the asset purchase program in August especially if downside risks increase for growth and inflation. We will get further insight into inflation tomorrow when the producer price index report is released. Early forecasts are for output prices to have fallen by 0.8% in June. The Pound soared on the initial announcement that no further action would be taken by the MPC but has started to give back gains as the door remains open for additional measures.