Arab Today, arab today bank of england chief king set for final rate meet
Last Updated : GMT 22:49:43
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Bank of England chief King set for final rate meet

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Arab Today, arab today Bank of England chief King set for final rate meet

London - Arabstoday

Bank of England Governor Mervyn King presides over his final policy meeting this week with analysts expecting him to again call for more cash stimulus to support Britain\'s fragile economic recovery. The two-day gathering of the Monetary Policy Committee (MPC) starting Wednesday precedes King\'s departure as head of the British central bank at the end of June. King, who has led the Bank of England for a decade, will make way for Mark Carney who last week stepped down as governor of the Bank of Canada. The Bank of England has kept its main interest rate at a record-low 0.50 percent -- and has pumped £375 billion ($573 billion, 439 billion euros) into Britain\'s economy under quantitative easing -- since early 2009. \"It would seem strange if the Committee were to embark on a radical departure from its current course just ahead of Mark Carney taking over the helm at the Bank of England in July,\" said Philip Shaw, an economist at Investec financial group. \"The asset purchase target looks set to remain at £375 billion and the bank rate at 0.50 percent\" when the Committee announces its decisions on Thursday, he added. Under quantitative easing (QE), the Bank of England creates cash that is used to purchase assets such as government and corporate bonds with the aim of boosting lending and in turn economic activity. QE can stoke inflation however as it is tantamount to printing money and although the British economy escaped a return to recession in the first quarter, the country stands a long way from producing strong growth according to market watchers. Britain expanded by 0.3 percent in the first quarter of 2013, recent official data showed, returning to growth and avoiding its third recession since the 2008 global financial crisis. Gross domestic product (GDP) grew in the January-March period, after falling by 0.3 percent in the final three months of 2012. That still left the economy essentially flat over the past six months, but it did avoid entering recession -- which is defined as two consecutive quarters of shrinking economic activity. \"With June\'s meeting representing Mervyn King\'s last hurrah as governor, other Committee members may be half-minded to support his recent desire for more stimulus as a parting gift,\" noted Martin Beck at the Capital Economics research group. \"However, economic developments since the MPC\'s last (monthly) meeting and the prospect of a pick-up in inflation over the next few months are likely to quell any charitable leanings in that direction,\" added the economist. King in May called for £25 billion more QE stimulus cash at his penultimate meeting, but was out-voted for the fourth month in a row, minutes showed. The Bank of England\'s principal task is to use monetary policy as a tool to keep annual inflation close to a government-set target level of 2.0 percent, in order to preserve the value of money. British 12-month inflation slowed to 2.4 percent in April, hitting a seven-month low point on the back of falling transport costs and oil prices, official data showed. The Bank of England has meanwhile forecast that the British economy is set to grow faster than expected in the coming months, while stressing the weak nature of the recovery. The International Monetary Fund last month said that Britain was a long way from a \"sustainable recovery\", and called for the government to boost infrastructure spending to accelerate economic growth and offset austerity. The Conservative-Liberal Democrat government, led by Prime Minister David Cameron, insists that its steep cuts to state spending are needed to drive down a record budget deficit inherited from the previous Labour administration in 2010.

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