Arab Today, arab today bank of england to \stick with\ recordlow rates
Last Updated : GMT 00:07:53
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Bank of England to \'stick with\' record-low rates

Arab Today, arab today

Arab Today, arab today Bank of England to \'stick with\' record-low rates

London - AFP

The Bank of England will leave its key interest rate at a record low 0.50 percent on Thursday with Britain\'s economy still fragile and the country set for lower inflation, according to analysts. The BoE\'s Monetary Policy Committee (MPC) is also forecast to keep its economic stimulus at £275 billion (332 billion euros, $425 billion) at its first meeting of the new year that begins on Wednesday. The central bank\'s main interest rate has stood at 0.50 percent since March 2009, when it also began injecting £200 billion into the economy under the policy known as quantitative easing (QE). The Bank of England decided in October last year to increase the amount by £75 billion, as Britain\'s economy struggled to recover from recession. 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. \"Bank of England inaction at the conclusion of the January MPC meeting seems probable given that October\'s £75 billion extension to the quantitative easing programme is not due to be completed until early February,\" said Howard Archer, chief UK economist at the research group IHS Global Insight. Holding back on more QE until early 2012 also gives the MPC more time to judge whether underlying inflationary pressures are easing,\" he added. Britain\'s 12-month inflation dipped to a rate of 4.8 percent in November from 5.0 percent in October, helped by lower food and petrol prices, and is forecast to fall back much closer to the BoE\'s 2.0-percent target during 2012. Meanwhile the British economy, which clawed its way out of a vicious recession in the third quarter of 2009, is struggling to mount a recovery under the pressure of government spending cuts and the eurozone debt drama. The government has forecast the British economy to grow by just 0.7 percent this year because of the eurozone crisis. Although Britain is not a member of the eurozone, it relies on the bloc for half of its trading. Capital Economics analyst Vicky Redwood agreed that the Bank of England would likely opt against any change in monetary policy this week -- but forecast more QE stimulus later in 2012. \"The MPC looks unlikely to do anything more while the asset purchases which began in October are still underway, especially given the recent slight improvement in the economic data,\" Redwood said. However, we doubt that the news has been strong enough to stop the MPC from voting for more stimulus next month. \"We expect the QE programme to reach some £500 billion by the end of this year,\" she added.

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