Bank of England Holds Rates


The Bank of England kept interest rates at 0.5 percent and made no change to its asset purchase target, keeping in place stimulus measures designed to nurse the economy back to health.

Although price pressures have picked up more than expected in recent months, recovery remains tentative and the euro zone's debt crisis has shown how fragile sentiment can be.

Britain's inconclusive election outcome provided additional justification for the BoE's wait-and-see approach.

David Cameron's center-right Conservatives and the smaller Liberal Democrats are attempting to reach a power-sharing deal after Thursday's election left Britain with its first hung parliament since 1974.

The Bank of England cut rates to their current record low and started quantitative easing in March 2009 when the economy was still reeling from a global credit crunch.

Things have got a lot better since and the BoE paused its asset purchase scheme in February once it had bought 200 billion pounds ($309 billion) of financial assets, mostly gilts.

But headwinds remain, not least from an impending public spending squeeze that some predict will be the toughest since World War Two, once a new government is in place.


TradingEconomics.com, Reuters
5/10/2010 10:25:10 AM