The COVID-19 pandemic has continued to weaken global economic conditions and growth projections have worsened since the last MPC meeting in May 2020.
The IMF for instance, has revised downwards its initial global growth forecast from a contraction of 3.0 percent to a contraction of 4.9 percent in its June 2020 release of the World Economic Outlook update.
The pandemic had a more negative impact in the first half of 2020 than anticipated and the recovery is projected to be more gradual than previously projected.
Global inflationary pressures remain subdued reflecting low energy prices and a sharp drop in real GDP with significant slackness in labor market conditions.
Brent crude oil price has recovered somewhat since the collapse in the first quarter of 2020 but still below the pre-pandemic level. This reflects hopes of reversal of the collapse in oil demand associated with the pandemic, as China recovers and lockdowns in other countries are gradually eased.
In the near term, inflation projections have generally been revised downwards amid lower oil prices and weaker demand. These factors more than offset any inflationary pressures from supply disruptions.