The Bank of England voted Thursday to keep interest rates at a record-low 0.50 percent, where they have stood for nearly six years, amid fears of deflation and slowing growth. Policymakers also decided to maintain the level of quantitative easing cash stimulus at £375 billion ($571 billion, 500 billion euros), the BoE said in a statement at the conclusion of a two-day meeting.
"The Bank of England's Monetary Policy Committee (MPC) at its meeting today voted to maintain bank rate at 0.5 percent," the statement read. "The Committee also voted to maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion." The decisions were in line with expectations, while economists said the MPC would have been mindful of weak inflation and the eurozone crisis centred on Greece.
Official data showed earlier this month that British inflation dived in December to an all-time low 0.50 percent on the back of collapsing oil prices, fanning fears of deflation. The tumbling rate, which compared with 1.0 percent in November, also sparked forecasts that borrowing costs would remain on hold for the rest of the year.
Minutes showed last month that the MPC panel had voted unanimously in January for the first time since July to hold interest rates at 0.50 percent. "Presumably today's decision to leave interest rates unchanged was again unanimous after deflation concerns prompted Martin Weale and Ian McCafferty to drop their call for a rate hike last month," said economist Samuel Tombs at research consultancy Capital Economics.
"An interest rate rise in the immediate future still looks very unlikely, but could well come back on the agenda later this year once the risk of a prolonged period of falling prices has diminished." That would leave interest rates on hold until after Britain's general election in May.
The BoE's main task is to use monetary policy as a tool to keep 12-month consumer price inflation inflation close to a government-set target of 2.0 percent. Economists must now wait until February 18 for publication of minutes from this month's MPC gathering. Tumbling oil prices translate into lower inflation because they pull down energy, manufacturing and transport costs. They also force down the cost of refined crude products like petrol and heating fuel.
Recent mixed data showed that Britain's economy grew in 2014 at the fastest annual pace since before the financial crisis - but experienced a fourth-quarter slowdown. Gross domestic product expanded by 2.6 percent last year, the best annual figure since 2007. However, GDP rose by just 0.5 percent in the October-December period. That was the weakest quarterly rate in a year and compared with 0.7 percent in the third quarter.
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