The Bank of England on Thursday voted to keep its main lending rate at its record-low level of 0.50 percent, deciding against mirroring a number of central banks who have cut borrowing costs in the past week. The BoE also opted against pumping out more new stimulus cash to boost economic growth, in a vote at the conclusion of its latest monthly monetary policy meeting.
"The Bank of England's Monetary Policy Committee today voted to maintain the official bank rate paid on commercial bank reserves at 0.5 percent," it said in a statement. "The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion ($584 billion, 445 billion euros)."
The latest no-change decisions had been widely expected by markets. Policymakers decided against following the path of recent interest rate cuts from the European Central Bank and its counterparts in Australia, Poland and South Korea aimed at boosting growth. Economists must wait until May 22 for publication of minutes from the BoE's two-day gathering for a clearer insight into the committee's thinking.
The British central bank's key lending rate has stood at 0.50 percent since March 2009, when it also embarked upon its radical quantitative easing (QE) stimulus scheme. Thursday meanwhile marked the penultimate interest rate meeting for BoE governor Mervyn King, who retires from the role next month. King, who will be replaced by Canadian central bank chief Mark Carney in July, has called repeatedly for more QE funds to stimulate growth and fend off the threat of recession.
"The MPC's continued inaction shows it has limited appetite for helping the economy to break out of its current insipid state," noted UK economist Martin Beck at research group Capital Economics. "Upon his arrival in July, Mark Carney may have his work cut out in persuading the committee of the merits of a more activist approach." Recent upbeat data showed the British economy - which has been hit hard in recent times by state austerity measures and the eurozone debt crisis - escaped from falling into its third recession since the 2008 global financial crisis.
British gross domestic product (GDP) rebounded by 0.3 percent in the first quarter of 2013, after shrinking 0.3 percent in the fourth quarter of 2012. A recession is defined as two straight quarters of contraction. That meant the economy was ultimately flat over the six month period. Official data Thursday showed that British manufacturing rebounded by 1.1 percent in March from February, gaining for the second month in a row.
The BoE's principal task is to use monetary policy as a tool to keep annual inflation close to a government-set target level of 2.0 percent, in order to preserve the value of money. British 12-month inflation was steady at 2.8 percent in March, recent data showed, and has held above target since November 2009. "It comes as no surprise that the MPC has decided to sit on its hands again," said Andrew Smith, chief economist at accountancy group KPMG. "After all, since the last meeting the growth outlook has improved and inflation - which is running well above target - remains stubbornly high."
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