Bank of England keeps policy steady despite darker UK outlook

Thu Dec 6, 2012 7:43am EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By David Milliken and Olesya Dmitracova

LONDON (Reuters) - The Bank of England left monetary policy unchanged on Thursday, voting as expected to stick with last month's decision not to buy more government bonds to bolster Britain's stagnant economy.

The decision comes despite finance minister George Osborne saying on Wednesday that Britain's economy would grow much more slowly 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 over the last three months of 2012 - a prospect reinforced by weak trade data earlier on Thursday and downbeat purchasing managers' surveys this week.

After a two-day meeting, the BoE's nine-member Monetary Policy Committee said its main interest rate would stay at a record-low 0.5 percent and it would not add to the 375 billion pounds ($603 billion) of bonds it has bought so far.

None of the 66 economists polled by Reuters last week had expected a change in interest rates or in the BoE's quantitative easing bond buying total, and there was no immediate market reaction to the decision. <BOE/INT>

"October's rise in inflation, the deal to transfer interest receipts ... to the government as well as doubts about the impact of more QE in the current economic environment, makes it reluctant to do more," said Joost Beaumont, an economist at Dutch bank ABN AMRO.

Britain recorded economic growth of 1.0 percent in the third quarter of 2012, marking an end to nine months of recession - its second since the 2008-09 financial crisis.

But most of the rebound was driven by a technical bounce due to the London Olympics and extra public holidays in the preceding quarter.   Continued...

The Bank of England is seen between pillars in the City of London April 11, 2011. REUTERS/Stefan Wermuth