Bank of England leaves policy on hold
The Bank of England stuck to its current policy of government bond purchases today, as Britain is creeping out of recession and hopes are running high for a sweeping move by the European Central Bank to ease the euro zone crisis.
Attention will now turn to the ECB's interest rate decision and news conference, at which governor Mario Draghi is expected to announce the framework for a new bond-buying plan aimed at bringing Spain and Italy's borrowing costs down.
The crisis in the euro zone, Britain's main export market, has hurt demand and made businesses reluctant to invest, adding to the headwinds for growth from the government's tough austerity plan to erase a huge budget deficit.
The government has announced a number of measures to get credit flowing and boost infrastructure and house building without spending taxpayers' money. But finance minister George Osborne remains under pressure to loosen austerity.
Since the BoE's August meeting, a rebound in closely watched business surveys has increased hopes that the economy is crawling out of recession after three quarters of contraction, though the road to a proper recovery still looks bumpy.
After the two-day meeting that ended earlier today, the Monetary Policy Committee made no change to the current plan to buy €50 billion of British government bonds, which will take its total purchases to €375 billion by November.
The central bank also left its interest rate unchanged at a record-low 0.5 per cent who had all bet on an unchanged policy.
Sterling was steady and gilts were little changed after the decision.
"The MPC's decision to leave policy on hold today was unsurprising and may partly have reflected a desire to wait to see what comes out of today's ECB meeting," said Vicky Redwood, economist at Capital economics.
However, most see another dose of quantitative easing once the current round is completed in November to support an economy that has not fully recovered from the 2008-2009 slump and has been back in recession since late last year.
"The economy is clearly still finding life very difficult; and further stimulative action remains highly likely in the fourth quarter," said IHS Global Insight economist Howard Archer.