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Bank of England keeps rates at historic low

Jan 12 2012 14:44
Reuters
London - The Bank of England kept its quantitative easing programme of asset-buying to prop up Britain's fragile economy at £275bn on Thursday, opting not to increase it after recent mixed economic data.

The Bank's Monetary Policy Committee also kept interest rates at a record low of 0.5%, where they have been since March 2009.

All but one of the nearly 50 economists polled by Reuters from December 29 to January 4 had forecast the bank would keep the target for its asset purchases unchanged, after raising it by £75bn in October.

But they expect it to unveil an extra £50bn injection in February.

Bank policymakers have been warning about the risk of an economic contraction and even recession in Britain as a debt crisis rages in its main trading partner, the eurozone.

The European Central Bank is also widely expected to keep rates steady at 1.0% later on Thursday, pausing to assess the impact of the crisis-fighting steps it took in the final two months of 2011.

Recent mixed economic news had bolstered the widespread view that the bank might want to wait until February before deciding to expand its quantitative easing programme. By then the current round of QE will be concluded and the central bank will have its latest growth and inflation estimates.

British inflation has only just started to fall from a three-year high above 5%, though the bank forecasts it will tumble early this year and dip below its 2% target towards the end of 2012 due to economic weakness and fading one-off effects such as tax increases that have pushed up prices over the past year.

 
 
 

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