Bank of England keeps monetary policy unchanged

The Bank of England kept its monetary policy unchanged today as expected, sticking to its commitment to keep interest rates steady while unemployment remains high.

The central bank made no change to its £375 billion (€442 billion) of asset purchases or to its main interest rate - which has stood at a record-low 0.5 per cent since March 2009 - following the two-day meeting of its Monetary Policy Committee this week.

Britain's economy has shown signs of further recovery this month, diminishing the prospect of more asset purchases, which had been backed by a minority of policymakers until new governor Mark Carney unveiled his forward guidance strategy in August.

Mr Carney said the central bank would not raise interest rates before the unemployment rate - currently 7.7 per cent - falls to 7 per cent, unless inflation threatens to get out of control.

The BoE forecasts it will take until late 2016 before unemployment falls this far, despite strengthening economic growth, but most private-sector economists think unemployment will fall much faster, and financial markets price in a rate rise as soon as early 2015.

Earlier this week the International Monetary Fund revised up Britain's economic growth prospects by the biggest amount of any advanced economy, forecasting growth of 1.4 per cent this year and 1.9 per cent for 2014.

The MPC made no statement alongside its monetary policy announcement, as usual, and details of its discussions will not be published until the release of minutes on October 23rd.

Reuters