Monetary policy remained on hold in Europe as the Bank of England held its key rate at 0.5% and made no changes to the GBP 200 billion Asset Purchase Program. Likewise the European Central Bank also left its key interest rate unchanged at 1.0%.
Both Central banks mentioned a slight pick up in inflation due to temporary measures, and expected inflation to remain within their respective target ranges for the near term. The BoE also noted that while some capacity may be lost, there is still plenty of excess capacity.
They also pointed out that while both economic areas had started to pick up, there was still a lot of temporary impulses acting on economoic activity and that the recovery is likely to remain subdued because of deleveraging and downside risk.
There is a chance that both of these central banks will commence tightening later in the year, but this will be dependent on the evolution of inflationary and economic conditions.