Arab Today, arab today bank of england keeps record low rates
Last Updated : GMT 03:26:57
Arab Today, arab today
Arab Today, arab today

Bank of England keeps record low rates

Arab Today, arab today

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

London - AFP

The Bank of England held interest rates on Thursday at a record low 0.50 percent for the 28th month in a row, as policymakers sought to help the flagging recovery and set aside inflation woes. The decision came shortly before the European Central Bank lifted its key borrowing rate for the eurozone by a quarter-point to 1.50 percent. The British central bank also said in a statement that it has decided against changing its stimulus programme, under which it had injected £200 billion (225 billion euros, $328 billion) into the economy. Thursday\'s rate decisions were in line with market expectations, while minutes from the BoE gathering will be published on July 20. \"Economic frailty combined with the temporary nature of the current bout of inflation provides little rationale for raising rates at the moment,\" said economist Scott Corfe at the Centre for Economics and Business Research. \"Unless economic prospects in the UK show a sharp improvement over the coming months -- which we think is very unlikely -- do not expect a rate rise until next year.\" The ECB meanwhile unveiled its second interest rate increase since April as it looked to fight soaring eurozone inflation. British inflation is also high, running at 4.5 percent on an annual basis, which is the highest level for more than two-and-a-half years. The rate is more than double the BoE\'s official target level of 2.0 percent, and has been propelled in recent months by surging food and fuel prices. Policymakers normally raise interest rates to combat high inflation but the MPC\'s hands are tied by stagnant British economy growth. Gross domestic product (GDP) grew by 0.5 percent in the first three months of this year. However, that left activity broadly flat over the past six months after a 0.5-percent contraction in the previous quarter. The BoE is worried about other increasingly gloomy signals over the flagging British recovery, which has been partly dented by the coalition government\'s painful austerity measures. Since the last BoE meeting, several major high-street retailers have collapsed in the face of weak consumer demand, with homeware chain Habitat, department store TJ Hughes and fashion retailer Jane Norman now in administration. Companies have also announced thousands of job cuts, including Lloyds Banking Group and Canadian manufacturer Bombardier. The British coalition government\'s painful austerity measures have also dampened activity, while a batch of weak economic data has highlighted weakness in the manufacturing sector. \"Recent data has, in general, been soft with worries about the strength of the household sector of key concern,\" added ING economist Philip Knightly. \"With government spending set to contract, this places a massive burden on the corporate sector to generate growth, but so far it isn\'t happening.\" Ahead of the BoE decision, official data showed that British manufacturing output rebounded in May on a monthly basis, but only just offset April\'s heavy drop. Production soared in May by 1.8 percent, the Office for National Statistics (ONS) said in a statement. That was the sharpest monthly gain since March 2010. However, the ONS also sharply revised its estimate for April, with manufacturing output slumping by 1.6 percent. \"May\'s rise in manufacturing output only just offset April\'s bank holiday-related drop, adding to other evidence suggesting that the industrial recovery is weakening,\" said Capital Economics analyst Vicky Redwood. The coalition Conservative-Liberal Democrat government has consistently stressed that recovery is partly dependent on a strong manufacturing industry.

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