BoE to increase money-printing plan as key rate stays at 0.5pc
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The Bank of England said it will add 50 billion pounds (€56 billion) to its program of asset purchases to fight the UK recession as policy makers kept the benchmark rate at a record low.
The nine-member Monetary Policy Committee, led by Governor Mervyn King, left the main rate at 0.5 percent, the lowest since the bank was founded in 1694, as predicted by 60 of 61 economists surveyed by Bloomberg News. They also chose to increase their program to buy government and corporate bonds with newly printed money to £125 billion.
Prime Minister Gordon Brown’s government has authorized King to print a total of £150 billion to stave off deflation in an economy where gross domestic product dropped the most since 1979 in the first quarter. Lloyds Banking Group said today that “difficult economic conditions” will persist for a year or more, exacerbating the bank’s corporate bad loans.
“The economy’s not good enough yet” to allow the central bank to stop creating money, James Knightley, an economist at ING Financial Markets in London, said before the decision. “Positive growth is still a very long way away, unemployment is going to continue rising and corporate profit is going to continue falling and turn into a loss. They’ll use the next 75 billion as well.” (Bloomberg)
- Svenja O’Donnell
