The Bank of England on Thursday voted to keep its key interest rate at a record-low 0.50 percent and to maintain its economic stimulus programme amid mixed signals for the British economy.

The BoE kept the level of its asset purchasing plan, aimed at boosting lending among banks, at 325 billion pounds (388 billion euros, $514 billion), it said in a statement after a two-day monetary policy meeting.

Financial markets took the news in their stride after market expectations had been for no change to the rate or Quantitative Easing (QE), or the central bank's stimulus programme.

Investors must wait until April 18 to see the minutes of the meeting and reasons behind the latest decisions amid concerns over the impact on Britain's fragile economy of the debt crisis in key trading partner the eurozone.

The OECD think-tank last week forecast that Britain was already back in recession, in contrast to the British Chambers of Commerce, which has cited an "encouraging" pick-up in economic activity in the past three months.

Recent surveys on construction, manufacturing and services sectors have meanwhile suggested that the economy might return to growth in the first quarter - and thereby avoid recession.

The upbeat mood, however, was jolted on Thursday by news of a surprise contraction in manufacturing activity, while most economists expect that the BoE will pump more emergency cash into the economy in the coming months.

"Prospects for monetary policy looking ahead look anything but straightforward and are not made any clearer by the unexpected buoyancy of recent surveys, which seem to be outperforming the official UK data," said Investec bank economist Philip Shaw.

"A period of sub-trend growth should still result in more QE next month but there is a genuine question mark here and first-quarter GDP, due on 25 April, could be a pivotal indicator."

The British economy shrank by a worse-than-expected 0.3 percent in the fourth quarter.

Another contraction in gross domestic product in the first three months of 2012 would place Britain back in recession, defined as two successive negative quarters.

The economy has also been hampered by elevated oil prices and painful state austerity cuts that are aimed at avoiding a Greek-style debt meltdown.

"There are still major risks for the UK," said ING bank economist James Knightley.

"The eurozone sovereign debt crisis is far from being resolved and this is critical for the UK given (that) half of its exports go there and the banking sector is so exposed to the region.

"The recent rise in oil prices is a concern for activity and a potential petrol tankers driver strike could cause significant disruption to the country."

Thursday's BoE announcements came one day after the European Central Bank held its interest rate at a record-low 1.0 percent and ruled out winding down its anti-crisis measures amid signs that the eurozone was in recession.

The BoE main lending rate has stood at 0.50 percent since March 2009, when the central bank also began to inject the economy with 200 billion pounds under the radical QE policy.

Under QE, the central bank creates new cash that is used to purchase assets such as government and corporate bonds in the hope of boosting lending by retail banks and in turn growing the economy.

To boost economic activity, the BoE's policymakers voted in February to increase the QE programme by 50 billion pounds to the current level.

The BoE's main task is to use monetary policy tools to try and keep annual inflation rate close to a target level of 2.0 percent.

The 12-month inflation rate fell sharply in February to a 15-month low of 3.4 percent thanks to falling electricity and gas bills.

channelnewsasia.com