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Bank of England keeps main rate steady at 0.5 percent

by International Commercial Investment on April 11, 2014

Source: Reuters

The Bank of England kept interest rates unchanged at a record-low 0.5 percent on Thursday, as expected, as it waits for Britain’s economy to recover fully from the financial crisis.

None of the 61 economists polled by Reuters before the decision had expected a change, and most think a rise in interest rates is still around a year away.

The BoE also said it would maintain the stock of asset purchases from its quantitative easing programme at 375 billion pounds ($628 billion), in line with a previous commitment not to reduce them until some time after it starts raising rates.

Unemployment remains slightly above the 7 percent level the central bank set in August as a threshold for beginning to consider raising rates. In February it added that it expected to keep rates on hold for some time after that.

Despite strong growth over the past year and the best growth prospects for 2014 among any big advanced economy, British output is still below its pre-crisis peak, lagging behind the United States and Germany, which both recovered faster.

Meanwhile consumer price inflation remains muted. It fell to a four-year low of 1.7 percent in February, comfortably below the BoE’s 2 percent target, and retailers have reported they cut prices in March.

House prices are rising fast, at an annual rate of more than 10 percent, but the central bank has yet to show much alarm. It has also said it will target mortgage lending directly before raising interest rates for the whole economy if house price rises threaten to get out of control.

BoE Governor Mark Carney said in February that the central bank could take its time raising interest rates, and wait for sustainable increases in employment, income and spending before tightening monetary policy.

International Commercial InvestmentBank of England keeps main rate steady at 0.5 percent