London - The Bank of England (BoE) kept borrowing costs at a record low yesterday as policymakers look to untested tools to control Britain’s surging housing market.
The monetary policy committee (MPC) led by Mark Carney held the key interest rate at 0.5 percent, reinforcing the governor’s view that the panel is the “last line of defence” against property risks.
That will intensify the onus on the BoE’s financial policy committee to devise an action plan for property. The MPC did not issue a statement with the decision, but dropped a reference to forward guidance that featured in previous months.
The Organisation for Economic Co-operation and Development (OECD) warned this week of overheating in the property market, while BoE deputy governor Jon Cunliffe said it was “dangerous” to ignore its momentum. Officials say the debate over borrowing costs centres on the amount of spare capacity in the economy, leading investors to bet the central bank will refrain from raising rates until next year.
This week’s meeting was the first since unemployment fell below the 7 percent level Carney set as a key threshold under his forward guidance policy.
Carney has revamped guidance to focus on slack in the economy. Minutes of this week’s MPC meeting will be published on May 21.
The committee met after the OECD said house prices were “buoyant and significantly exceed long-term averages relative to rents and household incomes”. – Bloomberg