The Bank of England today kept interest rates at a record low of 0.5 per cent and made no increase to its unprecedented scheme of pumping money into an economy struggling to get back on its feet.
The decision was widely expected and analysts expect no change in monetary policy until much later this year as the central bank waits for a clearer recovery from the worst economic downturn since World War II.
If anything, BoE policymakers have left the door open to more monetary easing in the form of expanding their £200 billion scheme to buy assets with newly created money -- quantitative easing in the jargon -- if the economy worsens.
The BoE cut rates to their current record low and started QE last March when the economy was still reeling from a global credit crunch.
Things have got a lot better since and the BoE paused the scheme last month. GDP rose by 0.3 per cent in the last three months of 2009 but that was after 18 months which wiped out 6.2 per cent of output.
Headwinds remain -- from a global economy that is recovering only very slowly and a scarcity of credit that is making it harder for businesses and householders to continue spending.
Data earlier today showed house prices fell by 1.5 per cent in February in a sign that the property market recovery may already have run out of steam.
The upcoming election, expected on May 6th, is also clouding the outlook as recent polls have been pointing to a hung parliament -- where no one has an outright majority -- which could make fiscal consolidation harder.
Reuters