Bank leaves monetary policy unchanged

Published 04th Aug 2011

The Bank of England left interest rates at 0.5 percent on Thursday and kept the option of more quantitative easing up its sleeve should the economy weaken further.

The Bank issued no statement with its decision, but minutes from the meeting are likely to show a heated discussion about what tools could be used if the recovery fails to pick up.

All economists polled by Reuters had forecast no change in rates, but there had been some speculation in the market that the Bank might surprise with a second round of quantitative easing, particularly after a surprise move by the Swiss central bank on Wednesday.

The economy barely grew in the second quarter following six months of stagnation, and data from the United States and the euro zone suggests a global slowdown is becoming entrenched. Even inflation, currently more than twice the Bank's target, appears to be peaking.

All eyes will be on the European Central Bank later this session to see whether it can take steps to dissuade investors from attacking Spain and Italy.

UK interest rates have stood at 0.5 percent for more than two years -- already the longest period of inertia since World War Two -- and money markets are not pricing in any realistic chance of a rate rise until the second half of 2012.

The Bank has not bought any assets under its quantitative easing programme since February 2010, a time when the economy was picking up after a deep recession.

Source: ' Reuters '

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