bank of england keeps interest rates at record low
Last Updated : GMT 13:26:10
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Bank of England keeps interest rates at record low

Arab Today, arab today

Arab Today, arab today Bank of England keeps interest rates at record low

London - AFP

The Bank of England decided on Thursday against pumping the British economy up with more new cash and voted to hold its key interest rate at a record-low level of 0.50 percent after the country emerged from recession. "The Bank of England's Monetary Policy Committee today voted to maintain the official bank rate paid on commercial bank reserves at 0.5 percent," it said in a statement. The BoE addedd that its quantitative easing (QE) cash stimulus programme would remain at £375 billion ($604 billion, 467 billion euros). Minutes of the latest regular monthly meeting, to be published on November 21, will provide the reasoning behind Thursday's decisions. Also on Thursday, the European Central Bank voted to keep eurozone borrowing costs at a record low 0.75 percent, as it continues to assess the impact of its latest measures to fight the eurozone debt crisis. The Bank of England had been expected to maintain its monetary policy stance after recent data showed the British economy bounced back from a double-dip recession in the third quarter of 2012, helped by the London Olympics. The BoE had cut its key lending rate to the current record low level in March 2009, when it also launched its radical QE policy to pump up the British economy with hundreds of billions of pounds. The bank raised QE by £50 billion to £375 billion in July in a fresh attempt to stimulate lending by retail banks and help prevent economic contagion from the debt crisis in the neighbouring eurozone. Last month, analysts had expected the Bank of England to announce an increase to its QE stimulus at the two-day November meeting but changed tack after data showed Britain had escaped its longest double-dip recession since the 1950s. Gross domestic product (GDP) rallied by 1.0 percent in the third quarter, or three months to September, after output had contracted for the previous three quarters, recent data showed. But growth turned positive on one-off factors, including the London 2012 Olympic Games and rebounding activity after an extra public holiday for Queen Elizabeth II's Diamond Jubilee in the second quarter. "Up until last month, analysts had placed a 70-percent chance on an expansion of QE, but a bounceback in UK GDP, ongoing employment gains, good US data, signs of recovery in China and the aggressive ECB response to the eurozone crisis had seen these expectations plummet to just 40 percent last week," said ING bank economist James Knightley. Despite Britain's emergence from recession, a weak run of economic data has sparked concern over the fragile nature of the recovery -- and speculation over more QE stimulus. Economists expressed fears over the underlying health of the economy after weak purchasing managers surveys for Britain's construction, manufacturing and services sectors in October. Figures also British industrial output tumbled by 1.7 percent in September from the August level -- far worse than market expectations for a small drop of 0.4 percent. "The MPC would have been disappointed with recent data, enough perhaps for some members ... to consider further monetary stimulus," said HSBC bank economist John Zhu. "An unexpectedly sharp fall in the services PMI on Monday and then very weak industrial production and manufacturing numbers on Tuesday means that the vote today may be a split decision." The mood was also soured this week by news of falling retail sales and house prices during October. Under QE, the Bank of England creates cash that is used to purchase assets such as government and corporate bonds with the aim of boosting economic activity. The BoE's main task is to use monetary policy as a tool to keep annual inflation close to a target of 2.0 percent. British 12-month inflation slowed close to a three-year low at 2.2 percent in September, but many analysts warn that recent domestic energy price hikes would reverse the decline.  

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