BoE keeps monetary policy steady

THE BANK of England (BoE) left its monetary policy unchanged yesterday, as expected, voting as it did last month not to buy more government bonds and pump money into Britain’s stagnant economy.

The decision comes despite Finance Minister George Osborne saying on Wednesday that Britain’s economy would grow much slower than expected over the next three years and that a key debt reduction goal would not be met.

The forecasts also showed Britain’s economy was likely to shrink in the current quarter, a prospect reinforced by weak trade data earlier yesterday and downbeat purchasing managers’ surveys this week.

The BoE’s monetary policy committee said yesterday that its main interest rate would stay at a record low 0.5 percent and it would not add to the £375 billion (R5.3 trillion) of bonds it has bought so far.

Last month’s decision not to loosen monetary policy further was driven by an unexpectedly big jump in inflation in October to 2.7 percent, as well as a government decision to take back gilt interest paid to the BoE, which was tantamount to about £35bn of extra asset purchases.

Consumer inflation has been above the BoE’s 2 percent target since December 2009.

Economists are roughly split on whether the BoE will restart asset purchases in future.

However, any restart is not expected before February at the earliest, when the BoE publishes its next quarterly economic update. – Reuters


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