Bank Holds QE And Interest Rate Firm

Written By Unknown on Kamis, 04 April 2013 | 18.56

The Bank of England (BoE) has decided to hold its quantitative easing (QE) programme at £375bn as the base interest rate remains at an historic low of 0.5%.

The BoE's decision comes just hours after its Japanese counterpart decided to pump new money into its finance system.

The bank's decision, despite a new remit that gives it clearer leeway to disregard above-target inflation, comes as Britain's economy remains stagnant.

The central bank said it would not add to the £375bn of Government bonds it purchased between March 2009 and October 2012.

"The Bank of England's Monetary Policy Committee (MPC) today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%," the BoE said in a brief statement at the conclusion of its regular monthly meeting.

Melanie Bowler from Moody's Analytics said: "While the asset-purchase programme was not increased as we had expected, quantitative easing is expected to be expanded this year.

"With its remit extended, the BoE is also expected to expand the use of other unconventional monetary policy tools this year."

She added: "Meanwhile, the policy rate will remain at the record low 0.5% for two years more."

HIS Global Insight economist Howard Archer said: "The Bank of England's decision to hold off from quantitative easing was highly likely once again the result of a split 6-3 vote.

"With consumer price inflation set to move above 3% in the near term and sterling still vulnerable despite rising from its lows, several MPC members may want to see evidence that underlying price pressures are broadly contained before approving further stimulative action."

Mr Archer added: "However, we suspect that it is more a matter of when, rather than will, the MPC approve further quantitative easing to try and support the economy."

Japan has made a sweeping shift in its monetary policy, aiming to spur inflation and get the world's third-largest economy out of a long, debilitating slump.

Bowing to demands from Prime Minister Shinzo Abe for more aggressive monetary easing, the Bank of Japan has announced a policy overhaul.

It said the plan was intended to double the money supply and achieve a 2% inflation target at the "earliest possible time, with a time horizon of about two years."


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