Bank of England keeps interest rate at record-low 0.50%
2011-04-07 14:54:52
The Bank of England voted to keep its key lending rate at a record-low 0.50 per cent on Thursday just as the European Central Bank (ECB) was later set to hike eurozone borrowing costs for the first time in nearly three years.
"The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%," the BoE said in a statement after a two-day policy meeting.
The ECB is expected to announce its first interest rate hike since July 2008 - from an all-time low of 1.0 per cent - to combat high inflation across the eurozone.
Inflation is even higher in Britain but because its recovery from recession has stalled, the BoE is adopting a wait-and-see approach before embarking on its own policy of rate tightening.
The BoE also decided on Thursday against altering its stimulus programme, known as Quantitative Easing (QE), under which it has injected US$322 billion into the economy.
The latest announcements were in line with market expectations. Official minutes from the Monetary Policy Committee (MPC) meeting will be published on April 20, when the reasons behind the decisions will be disclosed.
Ahead of the BoE's latest meeting, official data showed Britain's economy shrank 0.5 per cent in the final quarter of 2010 and analysts predict a stormy path to recovery due to the government's austerity drive.
Britain's Conservative-Liberal Democrat government is slashing state spending in a bid to virtually eliminate a record public deficit it inherited from the previous Labour administration after winning power last year.
Britain also faces further rises in consumer price inflation, whose annual rate jumped to 4.4 per cent in February, the highest for over two years and more than double the Bank of England's official target of 2.0 per cent.
In March, the MPC voted 6-3 to keep rates at 0.50 per cent, with those in favour of a rise pointing to inflationary pressures.
The central bank slashed interest rates to 0.50 per cent more than two years ago, in March 2009, when it also launched a radical QE programme to help drag Britain out of a deep recession.
Under QE, the bank has created new money by purchasing government bonds and high-quality private sector assets so as to give the economy an added boost.
Britain's recession, sparked by the global financial crisis, ended in the final quarter of 2009.