Thursday, January 10, 2013

BOE maintains bank rate, asset purchase program

    The Bank of England (BOE) held its benchmark bank rate steady at 0.5 percent and maintained its asset purchase program at 375 billion pounds, decisions that were widely expected.
    The BOE did not release any further details of its decision but said minutes of today's meeting of the Monetary Policy Committee would be released on Jan. 23.
    The BOE has held its bank rate steady since March 2009 and also initiated its asset purchase program at that time. The last increase in the size of the program was in July 2012, when it was increased by 50 billion pounds. Purchases under the program were completed in November.
    Economists expect the BOE to keep its bank rate at close to zero for several years in light of the continued weak economy.
     To help stimulate activity, the BOE launched a Funding for Lending Scheme (FLS) together with the UK Treasury that offers commercial banks cheap funds provided they are used to make loans to businesses. A recent BOE survey of credit conditions showed that the supply of credit rose in the last quarter of 2012 and should continue to expand in the first quarter of 2013.

     The United Kingdom's third quarter Gross Domestic Product rose a surprisingly strong 0.9 percent from the second quarter,  the first quarterly rise in four quarter. But compared with the same 2011 quarter, the UK economy stagnated after contracting by an annual 0.5 percent in the second quarter and 0.1 percent in the first quarter.
     The annual headline inflation rate was steady at 2.7 percent in November from October, above the bank's target of 2.0 percent inflation.


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