Monday 5 December 2016

BoE pauses on its bond-buying spree

Published 05/02/2010 | 05:00

Bank of England Governer Mervyn King. Photo: Bloomberg News
Bank of England Governer Mervyn King. Photo: Bloomberg News

The Bank of England paused its £200bn (€229bn) bond-purchase plan and left open the option to buy more as officials gauge the health of the UK's recovery.

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The Monetary Policy Committee, led by Governor Mervyn King, decided not to expand the asset-buying programme for the first time since it began in March last year. The bank also kept the benchmark interest rate at a record low of 0.5pc.

Bank of England policy makers are juggling the threat of an economic relapse against the risk of faster inflation and doubts about the next government's commitment to cutting the UK's record budget deficit. The decision probably marks the bank's final policy shift before the general election, which may take place on May 6.

"It makes sense for them to leave the door open, particularly given the uncertainty in the UK about the fiscal position and the election," said David Tinsley, economist at National Australia Bank in London and a former central bank official.

The yield on the 10-year government bond rose two basis points to 3.93pc. The pound rose 0.4pc and traded at $1.5868 as of 12:53 pm in London.

The bank said the purchases it has already made and the benchmark rate "would continue to impart a substantial monetary stimulus to the economy."

Policy makers "will continue to monitor the appropriate scale of the asset purchase program and further purchases would be made should the outlook warrant them".

"I don't think they'll do any more quantitative easing, that's probably it," said George Buckley, chief UK economist at Deutsche Bank AG in London.

"There's of course a risk of a double dip, they acknowledge that and I suspect that's why they're leaving the door open."

(Bloomberg)

Irish Independent

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