Bank of England unanimous on low rate

By Pan Pylas | July 23, 2009, Thursday |

Print Edition

THE Bank of England's rate-setting body was unanimous when it voted to keep its key interest rate at a record low of 0.5 percent and said it would assess whether it needed another 25 billion pounds (US$41 billion) to pump into the economy next month, minutes to the July 9 meeting showed yesterday.

The nine-member monetary policy committee said it had "not learned much" from developments in the month up to the meeting that would have enabled it to assess whether its program to enlarge the money supply needed to be stepped up.

Under an asset purchase program, the Bank of England can buy up to 150 billion pounds of assets from financial institutions, such as government and corporate bonds, financed by the creation of bank reserves - in effect, by printing new money. The central bank hopes banks will use the funds they gain to lend to businesses and consumers, but had only committed to using 125 billion pounds so far.

"There had not been enough clear evidence to suggest that the 125 billion pounds target should be changed at this meeting," the committee said.

Most economists had expected the Bank of England to signal that it would use up the final 25 billion pounds it was allocated by finance minister Alistair Darling in March.

Instead, the nine-member panel noted that it would be purchasing the 125 billion pound current target at "a slower rate over the next month than it had under the program so far" and that purchases would continue up until the next rate-setting meeting in August.

Economy

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Bank of England unanimous on low rate

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