The Bank of England maintained its record-low interest rates and stimulus package on Thursday, as policymakers balanced slowing domestic inflation and weaker growth, amid global economic uncertainty. The central bank's nine-member monetary policy committee opted at its regular monthly meeting to keep its key interest rate at 0.50 percent, where it has stood since March 2009 to bolster growth.
Shortly afterwards, the European Central Bank froze its key interest rate at an all-time low of 0.05 percent as it grapples with fresh economic woes in the eurozone. The Bank of England (BoE) also decided to keep the level of cash stimulus, or quantitative easing, pumping around the recovering British economy at £375 billion ($602 billion, 474 billion euros).
In contrast, the US Federal Reserve last week ended its own multi-billion-dollar QE package, but the Bank of Japan unexpectedly ramped up its own asset-buying plan in a bid to jumpstart its economy. "It's no surprise to see the Bank of England leave interest rates," said analyst Dennis de Jong at trading website UFX. "Despite the overall UK recovery remaining strong, weak wage growth and low inflation, combined with the prospects for the global economy deteriorating, rules out any increase in the short-term."
Markets shrugged off the decisions because they were in line with expectations, while economists do not anticipate a rate hike until next summer after a general election due in May 2015. "With inflation easing and uncertainty about the economic outlook growing, the MPC's decision to keep bank rate at 0.50 percent looks set to be repeated for a few more months," said Capital Economics analyst Samuel Tombs.
He added: "Low inflation, high debt levels and the likely intensification of the fiscal squeeze after the general election should ensure that the MPC is cautious and raises rates gradually." Britain's inflation slowed to a five-year low in September, recent data showed, dimming prospects of a BoE rate hike any time soon. The annual rate slid to 1.2 percent in September from 1.5 percent in August, falling further below the BoE's 2.0-percent target on the back of sliding oil prices.
The BoE is meanwhile mindful of the worsening outlook in the eurozone, which faces the threat of deflation, or price falls. Minutes from this week's meeting, containing reasons behind the decisions, will be published on November 19. In October, the MPC panel was split 7-2 in favour of no change, repeating the voting pattern from August and September.
The European Union meanwhile praised Britain's economy earlier this week for its "robust growth" and low unemployment. However, growth slowed in the third quarter of this year, with gross domestic product (GDP) growing 0.7 percent between July and September.
The economy had expanded by 0.9 percent during the second quarter, and by 0.7 percent in the first quarter. But despite the slowdown, Britain's economy still looks more dynamic than the eurozone, where growth is sluggish and deflation threatens. Britain is a member of the European Union but not of the eurozone - its main trading partner. Separately on Thursday, official data showed that British industrial output grew in September. Output rose 0.6 percent in September from activity in August, the Office for National Statistics (ONS) said in a statement. Over 12 months, output climbed by 1.5 percent.
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