BoE may maintain ultra-low interest rate till year-end

GMT 21:59 2014 Thursday ,10 July

Arab Today, arab today BoE may maintain ultra-low interest rate till year-end

The Bank of England
London - XINHUA

The Bank of England (BoE), or the central bank of Britain, may maintain its ultra-low benchmark interest rate and quantitative easing policy until the end of 2014, according to economists' expectation.
The increasing disinflation pressure has been holding back BoE's hawkish impulsion since the beginning of this year, though British labor market continuingly better off.
BoE Thursday voted to keep its main interest rate unchanged at 0.5 percent, and quantitative easing (QE) policy at 375 billion pounds (641 billion U.S. dollars).
It is the 64th successive months that interest rates stay at historical low level. The decision is within the market's estimation.
The BoE cut the interest rate to a record low of 0.5 percent in March 2009, to mitigate impacts brought about by the financial turmoil and eurozone sovereign debt crisis.
The previous change in the scale of QE, or asset purchasing program, was an increase of 50 billion pounds to a total 375 billion pounds in July 2012.
Earlier this year, the BoE had revised its forward guidance policy framework, by scrapping its 7 percent unemployment target, and introducing nearly 20 economic indicators to determine its monetary policy movement.
Last month, however, the central bank launched new measures to cap the households indebtedness caused by the bubbling housing market and soaring mortgage lending.
Economists predicted that the central bank would not be raising the benchmark interest rate, as well as tapering the QE policy, until next year, because of the further softening of inflation pressure.
Although the economic recovery appears to be heading into the second half of this year with plenty of momentum, the continued weakening of inflationary pressures suggests that today's decision by BoE to leave interest rate on hold is likely to be repeated throughout 2014, said Samuel Tombs, UK Economist at Capital Economics.
British consumer prices index (CPI) grew by merely 1.5 percent in the year to May 2014, down from 1.8 percent in April, according to the Office for National Statistics (ONS).
Data also showed that British unemployment rate drops to 6.6 percent in the three-month to April 2014, down from 6.8 percent in the first quarter, marking the lowest level over the past five years.
"Meanwhile, recent signs of a cooling in the housing market may have eased concerns that low interest rates are fueling another bubble," added Tombs.
Martin Beck, senior economic adviser to the EY ITEM Club, also said that with inflation falling to only 1.5 percent in May and pay growth remaining extremely weak despite strong growth in jobs, "leaving rates on hold for the time being is a no-brainer."
Furthermore, BoE's Financial Policy Committee has also shown its willingness to take action to curb the overheated housing market and indebtedness of households, which should relieve some of the pressure on monetary policy to deal with any housing excesses, noted Beck. (1 pound = 1.71 U.S. dollars)

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