The Bank of England held interest rates on Thursday at a record low 0.50 percent for the 28th month in a row, as policymakers sought to help the flagging recovery and set aside inflation woes. The decision came shortly before the European Central Bank lifted its key borrowing rate for the eurozone by a quarter-point to 1.50 percent.
The British central bank also said in a statement that it has decided against changing its stimulus programme, under which it had injected £200 billion (225 billion euros, $328 billion) into the economy. Thursday''s rate decisions were in line with market expectations, while minutes from the BoE gathering will be published on July 20. "Economic frailty combined with the temporary nature of the current bout of inflation provides little rationale for raising rates at the moment," said economist Scott Corfe at the Centre for Economics and Business Research.
"Unless economic prospects in the UK show a sharp improvement over the coming months - which we think is very unlikely - do not expect a rate rise until next year." British inflation is also high, running at 4.5 percent on an annual basis, which is the highest level for more than two-and-a-half years. The rate is more than double the BoE''s official target level of 2.0 percent, and has been propelled in recent months by surging food and fuel prices.
Policymakers normally raise interest rates to combat high inflation but the MPC''s hands are tied by stagnant British economy growth. Gross domestic product (GDP) grew by 0.5 percent in the first three months of this year. However, that left activity broadly flat over the past six months after a 0.5-percent contraction in the previous quarter. The BoE is worried about other increasingly gloomy signals over the flagging British recovery.
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