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Bank holds off recession cash boost
10.07.09
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Bank of England rate-setters are in "wait and see" mode as they held off from delivering more aid to the recession-blighted UK economy.
The Bank had been expected to expand its quantitative easing (QE) programme - effectively printing money - by £25 billion to £150 billion, but took no further action after its two-day meeting.
The Monetary Policy Committee (MPC), which also held interest rates at their record low of 0.5% for the fourth month in a row, said it would review the policy in August.
The decision comes despite concerns over the fragility of recent signs of stabilisation in the economy following a steep decline.
Although recent survey data has been more positive, manufacturing output showed a surprise fall in May, and official figures showed a far worse than expected 2.4% slump in overall GDP in the first three months of 2009 - the biggest quarterly fall in more than 50 years.
The pound gained 1% against the dollar - climbing above 1.62 US dollars following the decision - as markets took the lack of action from the Bank as a sign it was more optimistic about prospects.
But according to the Bank's own data, credit conditions remain tight and lending to business fell in April and May - suggesting efforts to boost the money supply were having little immediate impact.
Experts suggested the MPC's decision to hold off was simply a delay to give it more time to assess the strategy with updated inflation forecasts next month.
IHS Global Insight's Howard Archer, who expects rates to be on hold at 0.5% well into 2010, said: "We doubt the Bank of England is bringing an end to the programme.
"Despite the recent improved data overall, serious economic and financial obstacles remain to any near-term return to sustainable growth. Indeed, the danger of relapses was highlighted by the disappointing renewed contraction in industrial production in May."
Reader views (2)
I did not realise the Bank of England read the Evening Standard comments!
They obviously read my previous comment!!
- Reuben Camara, Republic of Morecambe, UK
Any idiot can print £25,000,000,000 of money which they do not have.
JOE PUBLIC WILL BE PAYING OFF THE CURRENT NATIONAL DEBT OF £1,400,000,000,000.00 FOR THE NEXT 30 YEARS AT LEAST.
- Reuben Camara, Republic of Morecambe, UK
