Just like the Fed's announcement yesterday was "substantially" less than some had expected, so the Bank of England unanimously kept its stimulus programme unchanged on Thursday as it awaited the outcome of Britain’s negotiations with the European Union over a post-Brexit trade deal. The BoE left its bond-buying programme at 895 billion pounds ($1.2 trillion), having ramped it up by 150 billion pounds last month.The British central bank also kept its benchmark interest rate at a historic low of 0.1%.

Echoing previous statements, the BoE said that the outlook remains uncertain and depends on pandemic and Brexit, while noting that the vaccine is likely to reduce downside economic risks. The central bank also extended the Term Funding Scheme for small firms by six months to Oct 31, in support of lending to the real economy - according to Bloomberg this is "an acknowledgement that strains in financing could continue well into next year."

And contrary to some expectations, there was no mention of negative rates despite rising chatter in recent months, with Bloomberg adding that the central bank is still examining the operational impact of cutting below zero so that’s a debate for next year, with the committee apparently split between internal and external members on the topic, and that could be a key factor in future decisions.

Here are the highlights from the statement:

• Successful testing of some COVID vaccines likely to reduce the downside risks to the economic outlook from COVID
• The MPC’s central projections in the November Monetary Policy Report assumed that the pandemic would weigh on near-term spending to a greater extent than projected in the August Report, given new restrictions announced in October in response to rising virus cases.
• They were also conditioned on the assumption that the United Kingdom, after leaving the Single Market and Customs Union on 1 January 2021, moved immediately to a free trade agreement with the European Union.  Conditional on those assumptions, UK GDP was projected to decline in 2020 Q4, and then pick up as restrictions were assumed to loosen.
• Nonetheless, the unemployment rate was projected to rise markedly, consistent with a material degree of spare capacity, before declining gradually.  Conditioned on prevailing market yields, CPI inflation was expected to be around 2% in two years’ time.
• Recent global activity has been affected by the increase in COVID cases and associated re-imposition of restrictions.
• UK-weighted global GDP growth in 2020 Q4 is likely to be a little weaker than expected at the time of the November Report.
• The near-term UK outlook has evolved broadly in line with the Committee’s expectations in the November Report.
• In the event that trade negotiations did not reach an agreement, the exchange rate would probably fall and, relative to the projections in the November Report, CPI inflation would belikely to be higher and GDP growth weaker.
• Committee agreed to a six-month extension to the TFSME
• If the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit.
• The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating sparecapacity and achieving the 2% inflation target sustainably

One notable highlight was found in the minutes, where the bank noted that that should market function worsen materially again, they stand ready to increase the pace of bond purchases. This too is as expected: most economists assume that would be the first response if there’s market disruption from a no-deal Brexit.

Both gilts and cable were little changed following the largely expected decision, with the pound trading above 1.36, the highest level in over two and a half years.