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Bank of England holds base rate at 0.5%

This is the discussion thread for the following MSE News Story:



  • 12:01 09Jul09 BoE leaves rates steady, maintains QE total

    LONDON, July 9 - The Bank of England surprised markets by announcing no expansion of its quantitative easing scheme on Thursday as it left interest rates unchanged at a record low of 0.5 percent for a fourth month running.

    Britain's central bank has been buying assets with newly created money since March and is on track to hit its existing 125 billion pound target later this month.

    It said it would review the programme in August.

    Markets had widely expected the BoE to increase its asset purchase target by 25 billion pounds, allowing it to continue to pump money into the economy until August when it publishes new quarterly economic forecasts.

    Britain's economy is no longer in freefall, as it was at the turn of the year, but bank lending remains weak and a sustained recovery is far from assured.

    Unemployment is still rising, manufacturing is still contracting and the recent pick-up in services activity may be little more firms re-stocking after running down inventory.

    From a macroeconomic point of view, leaving a gap in asset purchases between late July and early August, when the Bank of England will have more data, will do little harm. But it is likely to fuel the suspicion that the central bank has concluded its quantitative easing policy.
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