Bank of England Leaves Interest Rate And QE Unchanged


Bank of England’s Monetary Policy Committee (MPC) decided Thursday to leave the benchmark interest rate unchanged at the record low of 0.5 percent. The British central bank has maintained the key rate at the same level since March 2009. The Bank of England also announced not to change its monetary stimulus, which stands at £375 billion or about $600 billion.

Bank of England Leaves Interest Rate And QE Unchanged

Bank of England sticks to the plan

The British economy has been gathering momentum over the past few months, eliminating the prospects of further asset purchases. A few days ago, International Monetary Fund revised its growth estimate for Britain from 0.9 percent to 1.4 percent in 2013. Disposable income has improved and consumer confidence is rising. However, an unexpected decline in manufacturing activity in August showed that there are still some headwinds.

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Improving economic health has prompted some economists to believe that the Bank of England could increase the interest rate and slash the asset purchase program. But the newly-appointed Bank of England governor Mark J. Carney is likely to stick to the forward plan he unveiled in August, reports the BBC.

To clear the speculations, the Bank of England governor said that the benchmark rates will remain at an all-time low until the jobless rate falls below 7 percent from the current 7.7 percent. That was Mark Carney’s way of creating more certainty among individuals and businesses. That certainty can increase investment and borrowing in the country. Mr. Carney estimates to achieve that unemployment rate by the end of 2016.

Bank of England preparing to weather external shock

Experts say the Bank of England governor has shifted his focus to maintaining a stable financial system in the country. He wants to be prepared for any external shock, including a political deadlock and debt ceiling in the United States.

Last week, the European Central Bank also left its key interest rate unchanged at the all-time low of 0.5 percent. ECB chief Mario Draghi said he is ready to take necessary measures to protect the Eurozone from the U.S. turmoil.

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