By www.CentralBankNews.info The Bank of England (BOE) maintained its bank rate at 0.5 percent and its target for asset purchases at 375 billion pounds, as expected, in the final meeting of its retiring governor, Mervyn King.
King, the last remaining member of the BOE’s policy-setting Monetary Policy Committee since the bank was granted operational independence in 1997, will be handing over the reins to Mark Carney of the Bank of Canada on July 1.
King, along with two other members, has voted to expand the BOE’s asset purchase program by 25 billion pounds in the previous four meetings by the MPC but has failed to convince a majority of the nine-member committee.
Minutes of today’s MPC meeting will be available on June 19.
The BOE has held rates steady since March 2009 when it also started its asset purchase program, known as quantitative easing. The last time the BOE expanded its target for asset purchases was in July 2012 when it was raised by 50 billion pounds.
Britain’s economy has recently shown signs of improvement with Gross Domestic Product rising by 0.3 percent in the first quarter from a quarterly contraction of 0.3 percent in the fourth – averting the third recession since the global financial crises – for annual growth of 0.6 percent, the strongest growth rate in five quarters.
Last month King said a recovery of the U.K. economy was “in sight” and the BOE expects a gradual strengthening of economic growth.
The bank is continuing with its Funding for Lending Scheme (FLS), together with the U.K. Treasury, and during first quarter 13 banks drew down 2.6 billion in funds to lend at favourable terms to households and businesses, raising the total amount of funds drawn to 16.5 billion, covering 80 percent of the stock of lending to the U.K. economy.
Inflation in Britain, which has remained “stubbornly above” the BOE’s 2.0 percent target since December 2009, eased to 2.4 percent in April, breaking six consecutive months with inflation rates of 2.7 percent and above.
The BOE expects inflation to remain above its target until the third quarter of 2015 due to higher regulated and administered prices and the impact of a depreciation of sterling.
Today pound sterling was trading at 1.54 to the U.S. dollar, above a 2-1/2 year low of 1.4830 in mid-March, but down 5 percent from 1.62 at the start of the year.
