United Kingdom: Bank of England maintains rates
July 20, 2011
At its monetary policy meeting on 7 July, the Bank of England (BoE) maintained the Bank Rate at 0.50% and also left the asset purchase facility (quantitative easing) unchanged at GBP 200 billion. The decision was broadly anticipated by the market, as economic growth remains subdued. Seven out of the nine members of the Monetary Policy Committee (MPC) voted to keep rates on hold at 0.50%, including BoE governor Mervyn King. Two members of the MPC voted to tighten monetary policy by 25 basis points. In addition, one member voted to increase the asset purchase programme to a total of GBP 250 billion. The next MPC meeting will be held on 3-4 August. The BoE continues to face the dilemma of reining in high inflation without derailing the still fragile economic recovery. For the time being monetary authorities are likely to maintain the policy stimulus, with a majority of Consensus Forecast panellists expecting the BoE to stay put in the third quarter.