The Bank of England left interest rates at a record low of 0.5 percent for the seventh month running on Thursday 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.
"Right now we believe they will announce no further additions to the purchase programme in November, but much will depend on the economic news between now and then," said George Buckley, chief UK economist at Deutsche Bank. 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 ploughed 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. Thursday marks the first anniversary of the major central banks' surprise co-ordinated rate cut to bolster confidence after the collapse of Lehman Brothers.
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