Arab Today, arab today bank of england expected to freeze rates
Last Updated : GMT 08:53:10
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Bank of England expected to freeze rates

Arab Today, arab today

Arab Today, arab today Bank of England expected to freeze rates

London - AFP

The Bank of England will keep interest rates at a record low 0.50 percent and opt against expanding its stimulus plans until the new year despite ongoing eurozone turmoil, analysts said. The BoE\'s Monetary Policy Committee (MPC) begins a two-day meet on Wednesday amid fears over the impact of the eurozone debt crisis on the flagging British economy, which is also buckling under state austerity and high inflation. In contrast, the European Central Bank is expected to cut interest rates for the second time in two months on Thursday, as the region teeters on the brink of recession and EU leaders battle to find a solution to the crisis. \"The December meeting of the MPC is unlikely to result in any early Christmas presents for the needy UK economy,\" said IHS Global Insight economist Howard Archer. \"The message coming from the MPC seems to be that more quantitative easing is highly probable but not until the new year. \"Meanwhile, the MPC appears disinclined to take interest rates any lower than the current record low level of 0.50 percent.\" Archer added that the BoE wanted to see inflationary pressures subside before pumping more cash into the economy. The BoE\'s key interest rate has stood at 0.50 percent since March 2009, when the bank also decided to begin injecting £200 billion ($308 billion, 233 billion euros) into the economy under the policy known as quantitative easing. QE is a process whereby central banks create new cash that is used to purchase assets such as government and corporate bonds in the hope of giving a boost to lending and economic growth. It amounts to monetising debt. Back in October, the Bank of England reactivated the emergency policy, announcing plans to pump out another £75 billion over a four-month timeframe. \"The MPC has sent some strong signals that further quantitative easing is likely before long,\" said Vicky Redwood, chief Britain economist at the Capital Economics consultancy. \"However, the £75 billion of asset purchases voted for in October have not been completed yet. And the committee has indicated that it would prefer to finish them before announcing even more. \"This week\'s meeting therefore looks likely to pass without event. But we should see many more asset purchases in the new year,\" she added. Traders meanwhile are focused on the hotly-awaited EU summit on Thursday and Friday, when European leaders will seek to resolve the eurozone debt crisis once and for all. The Bank of England recently warned that the region\'s sovereign debt crisis represented the \"most significant and immediate threat\" to British financial stability, adding that risks have intensified in recent months. Although not a member of the eurozone, Britain is a key trading partner of the neighbouring bloc. The BoE took part last week in a joint action by six central banks to pump dollar liquidity into the financial system and avert a second credit squeeze linked to the eurozone debacle. BoE governor Mervyn King had said the coordinated action was only \"temporary relief,\" and confirmed the bank had \"contingency plans\" in case of a eurozone breakup. It came as Britain\'s government forecast the country to grow by just 0.7 percent next year, sharply down from an official estimate of 2.5 percent given in March. At the same time, inflation remains stubbornly high, driven largely by high energy costs. British official 12-month inflation fell to a rate of 5.0 percent in October from a three-year high of 5.2 percent in September. The BoE\'s key task is to use monetary policy as a tool to keep inflation close to a government-set target of 2.0 percent.

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