Friday, March 9, 2012

Bank of England Holds Rate at 0.50%, APP at 325B

The Bank of England (BoE) held the Bank Rate at 0.50%, and kept its Asset Purchase Program (Quantitative Easing) target unchanged at GBP 325 billion.  The Bank said: "The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.  The Committee also voted to continue with its programme of asset purchases totalling £325 billion financed by the issuance of central bank reserves. The Committee expects the announced programme of asset purchases to take another two months to complete.  The scale of the programme will be kept under review."

At its previous meeting the Bank of England expanded its asset purchase program by GBP 50 billion, after increasing it by 75 billion at its October meeting. The Bank also held the official Bank Rate unchanged at 0.50% at its December meeting last year; the rate has remained on hold since March 2009, when the Bank reduced the interest rate by 50 basis points to 0.50%.  The United Kingdom reported annual consumer price inflation of 3.6% in January, 4.2% in December, 5.2% in September, 4.5% in August, and 4.4% in July, and still above the Bank's inflation target of 2.00%.

The UK saw quarterly GDP growth of -0.2% in Q4 this year (0.5% in Q3, 0.0% in Q2, 0.4% in Q1), while annual economic growth was reported at 0.8% (0.5% in Q3, 0.6% in Q2, 1.6% in Q1).  
The British pound (GBP) has weakened by about 2% against the US dollar over the past year, while the USDGBP exchange rate last traded around 0.64


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