BOE Keeps Asset-Purchase Plan at 125 Billion Pounds

The Bank of England stuck to its plan to buy bonds with 125 billion pounds ($202 billion) of newly printed money as officials assess whether the worst of Britain’s recession is over.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, kept the interest rate at 0.5 percent and refrained from expanding its asset-purchase plan.

Bonds tumbled after the decision, which dashed some investors’ expectations the bank would spend the full 150 billion pounds authorized by Gordon Brown’s government. King said last month evidence from the plan is positive” so far and the Bank of England said today it will wait until it has new inflation forecasts in August before deciding the next step.

The yield on the benchmark 4.5 percent gilt due March 2019 jumped and was at 3.744 percent at 12:45 p.m. in London compared with 3.59 percent earlier today. It was 3.62 percent before the plan’s announcement in March. The pound rose as much as 0.6 percent to $1.6265.

Britain’s economy may be helped by a global rebound. The International Monetary Fund yesterday said the U.K. will return to growth next year, forecasting an expansion of 0.2 percent after a contraction of 4.2 percent this year.

BOE Keeps Asset-Purchase Plan at 125 Billion Pounds, Bloomberg
7/9/2009 9:44:24 AM