Bank of England Policy Remains on Hold
May 10, 2010
An inconclusive election result in which no party won a majority of the British parliament’s 650 seats left the Bank of England with no other choice than to leave its policy settings of a 0.5% Bank Rate and a Gbp 200 ceiling on its asset purchase program as they were. Talks continue between the Conservative Party and the Liberal Democrats to produce a policy manifesto they and their rank and file can agree on. A statement from the Monetary Policy Committee simply observed that the quarterly Inflation Report will be released on May 12 and that minutes of today’s meeting arrive on May 19. The minutes will likely reveal a unanimous decision, similar to the results at the five previous monthly policy meetings.
The Bank of England previously cut the benchmark Bank Rate from 5.0% at the end of 3Q08 to 0.5% after its March 2009 meeting. The asset purchase program was launched in March 2009 at an initial limit of Gbp 75 billion and later raised to Gbp 125 billion at the May 2009 meeting, Gbp 175 billion at the August 2009 meeting and Gbp 200 billion after the November 2009 meeting. That final move was not unanimously sought, as there was one dissent by Miles in favor of Gbp 215 billion and another by Dale in favor of keeping the limit at Gbp 175 billion.
The Fed’s currency swap line with the Bank of England was reopened in light of recent global market volatility and in line with similar actions taken between the Fed and several other major central banks.
Britain will be releasing several important data this week, including industrial output, the DCLG and RICs house price index, unemployment, wages, productivity, and same-store retail sales. Real GDP growth returned to the black last quarter, expanding 0.8% at an annualized rate. However, the latest on-year GDP and industrial production changes remained negative, and CPI inflation of 3.4% is higher than in most countries.
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England
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