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Bank of England holds rates, resists pumping extra cash
Source: BI-ME , Author: BI-ME staff
Posted: Thu July 9, 2009 9:15 pm
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INTERNATIONAl. The Bank of England has held interest rates at a record low and decided against expanding its programme of injecting money directly into the economy.

The rates move by the Bank's Monetary Policy Committee was widely expected by economists, but the decision not to increase the scale of its money-printing programme came as a surprise

The Bank of England's Monetary Policy Committee (MPC) had been widely expected to expand its quantitative easing (QE) programme - effectively printing money - by £25 billion to £150 billion.

But the scale of the operation was left unchanged at £125 billion, while interest rates were held at their current 0.5% record low for the fourth month in a row.

The decision comes despite concerns over the fragility of recent signs of stabilisation in the economy following a steep decline.

Manufacturing output showed a surprise fall in May, while official figures have shown a far worse than expected 2.4% slump in overall GDP in the first three months of 2009 - the worst in more than 50 years.

In a short statement, the Bank said its current QE operations would take another month to complete.

It will review the programme again at its August meeting, alongside its latest inflation projections.

The pound immediately gained 1% against the dollar, climbing above US$1.62 US on signs the Bank is more optimistic about economic prospects.

According to the Bank's own data, credit conditions remain tight and lending to business fell in April and May - suggesting that the boost to the money supply is having little immediate impact.

Despite the decision to hold back from further QE this month, the CBI business group predicted the programme would eventually be extended.

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