Bank of England Holds Rates at 0.5%

The Bank of England left interest rates at a record low of 0.5 percent for the seventh month running and said it would keep its 175 billion pound asset buying programme in place, as expected

Focus has now switched to the November meeting when the Monetary Policy Committee will have new economic forecasts, though most analysts do not expect the BoE will change policy then either given Britain may now be emerging from recession.

A sizeable minority still see a further expansion of the quantitative easing programme which pumps money into the economy because any recovery is likely to be fragile.

BoE Governor Mervyn King had actually wanted to raise the asset-buying total to 200 billion pounds in August but, along with two other members, was outvoted by the rest of the MPC.

On Thursday, the BoE simply said it would complete its scheduled asset-buying programme next month and keep the scale under review.

In either case, policy is likely to remain ultra-loose for months yet as policymakers around the world have been stressing now is not the time to withdraw the extraordinary support they have plowed into their economies over the last year.

British economic output in the second quarter of 2009 was 5.5 percent lower than a year ago and policymakers are worried it will take years for the level of GDP to get back to where it once was, entailing huge job losses in the interim.

And while most recent data have pointed to the worst being over for the economy, figures this week showing a shock 1.9 percent fall in August manufacturing output raised doubts over whether the economy started growing again in the third quarter.

Bank of England Holds Rates at 0.5%, Reuters
10/8/2009 9:31:39 AM