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BoE keeps rates at 0.5 pct, makes no change to QE

Published 12/09/2010, 07:00 AM
Updated 12/09/2010, 07:04 AM

LONDON, Dec 9 (Reuters) - The Bank of England's Monetary Policy Committee voted to keep interest rates unchanged and make no new quantitative easing purchases after its monthly meeting on Thursday, in line with market expectations.

None of the more than 60 economists polled by Reuters last week had expected a change to the 0.5 percent interest rate and 200 billion pounds ($317 billion) of total asset purchases that have been in place since February.

Despite a bailout for neighbouring Ireland, the economic outlook for Britain has changed little since November's MPC meeting and consumer price inflation has risen further above its 2 percent target to 3.2 percent.

Manufacturing activity has been strong following robust overall economic growth of 0.8 percent in the third quarter.

The BoE will not publish details of the MPC's vote or discussion until Dec. 22, but most economists expect a repeat of last month's three-way policy split.

MPC member Andrew Sentance said since November's meeting that he still saw a need to raise interest rates, while his dovish counterpart Adam Posen reiterated his call for an extra 50 billion pounds of asset-buying with new money.

Most economists do not expect rates to rise until late 2011, and only see more printing of new money if looming government spending cuts cause a bigger-than-expected economic slowdown next year.

The BoE forecast last month that it would take until early 2012 for inflation to return to target, in part because value-added tax on most goods and services will rise by 2.5 percentage points in January. (Reporting by David Milliken, editing by Mike Peacock)

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