Arab Today, arab today bank of england set to hold rates after upbeat data
Last Updated : GMT 02:18:28
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Bank of England set to hold rates after upbeat data

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Arab Today, arab today Bank of England set to hold rates after upbeat data

London - AFP

The Bank of England is expected Thursday to hold record-low interest rates and its quantitative easing cash stimulus, after encouraging British economic growth data and despite fresh moves elsewhere to loosen monetary policy, dealers said. The nine members of the British central bank\'s Monetary Policy Committee (MPC) -- which includes governor Mervyn King who steps down next month -- will cast their votes on Thursday at the conclusion of their regular two-day meeting in central London. The BoE\'s key lending rate has stood at a record low level of 0.50 percent for more than four years, while it has also injected £375 billion ($582 billion, 443 billion euros) under its quantitative easing (QE) stimulus programme since March 2009. King, who will be replaced by Canadian central bank chief Mark Carney in July after he retires from the role, has called at the previous three meetings for more emergency QE to stimulate economic growth and fend off the threat of recession. However, recent official data showed that Britain has avoided falling into its third recession since the 2008 global financial crisis. British gross domestic product (GDP) expanded by 0.3 percent in the January-March period, rebounding from a 0.3-percent contraction in the fourth quarter of 2012, in a major boost to Prime Minister David Cameron\'s coalition government. The economy -- which has been hit hard in recent times by government austerity measures and the eurozone debt crisis -- outperformed market expectations for more modest first-quarter expansion of 0.1 percent. The technical definition of a recession is two successive quarters of economic contraction. \"The odds favour the Bank of England continuing to hold off from more stimulus on Thursday,\" said IHS Global Insight economist Howard Archer. \"GDP growth of 0.3-percent quarter-on-quarter in the first quarter and an improved set of purchasing managers\' surveys for April has eased pressure on the Bank of England for immediate further action to support the economy.\" However, he cautioned that the committee could still decide to implement another tranche of QE cash, in line with recent calls by Mervyn King. \"It is by no means a nailed-on-certainty that the MPC will sit tight on Thursday, and it is far from inconceivable that they could go for a further £25 billion of QE.\" Since the last BoE gathering, the British government has overhauled and extended its \"funding for lending\" scheme (FLS) in a bid to boost the flow of credit from banks to struggling small businesses, and thereby aid economic growth The Bank of England and the Treasury last month revealed that the FLS will now make central bank funds available for an extra year, until January 2015. \"A resumption of quantitative easing (QE) looks unlikely this month,\" said Capital Economics analyst Vicky Redwood. \"The preliminary estimate of first-quarter GDP was better than expected and some MPC members will feel that they have done enough to support the economy by extending the Funding for Lending Scheme. \"Accordingly, Mervyn King looks unlikely to get his wish for more asset purchases fulfilled before he leaves at the end of June,\" she added. Britain, though not a member of the eurozone, counts the single currency bloc as its main trading partner and has therefore been struck by fallout from the region\'s ongoing sovereign debt crisis. Added to the picture, the European Central Bank last week trimmed its key interest rate to a record low level of 0.50 percent as it sought to boost the crisis-hit eurozone. Also last week, the US Federal Reserve maintained its stimulative monetary policy stance. And this Tuesday, the Reserve Bank of Australia (RBA) cut rates to a record low. \"We are in era of global ultra-easy monetary policies which is unprecedented in the modern era,\" said VTB Capital economist Neil MacKinnon. \"However, tight fiscal policies designed to reduce government debt levels pulls in the opposite direction, as far as the impact of economic growth is concerned. \"In the UK, the economic outlook is still uncertain and requires a looser monetary policy,\" he added.

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