Bank of England keeps policy steady despite new remit

Thu Apr 4, 2013 7:56am EDT
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By David Milliken

LONDON (Reuters) - The Bank of England decided not to pump fresh money into its stagnant economy on Thursday, despite a new remit that gives it more leeway to disregard above-target inflation.

Further stimulus may still be on its way, however, after finance minister George Osborne tweaked the central bank's mandate two weeks ago.

He gave the bank stronger backing to ignore the series of one-off factors that have kept inflation above target for most of the time since the financial crisis.

The remit also paves the way for a broader review of the Bank of England's monetary policy when Mark Carney, who currently heads Canada's central bank, succeeds BoE Governor Mervyn King in July.

But for now there is no majority on the nine-member Monetary Policy Committee to add to the 375 billion pounds of government bonds it bought between March 2009 and October 2012, in line with economists' expectations.

Interest rates remained at a record-low 0.5 percent.

The British central bank's decision contrasts with that of the Bank of Japan, which has been under more overt political pressure to stimulate its economy. It shocked markets earlier on Thursday when it pledged to double its government bond holdings within two years.

Although King and two other policymakers backed restarting the BoE's asset-buying quantitative easing program in February and March, there has been no sign of a softening in the opposition of the other six members, who are more concerned about inflation and sterling weakness.   Continued...

A plaque depicting Britannia is seen on the outside of the Bank of England in the City of London February 4, 2010. REUTERS/Toby Melville