Bank of England Made No Changes

July 8, 2010

A typically terse statement with just the bare facts was posted on the Bank of England website at 11:00 GMT today.  The announced news had been expected.  Officials decided to maintain its Bank Rate at 0.5% and the size of the asset purchase program at £200 billion.  Investors will not learn if other members of the Monetary Policy Committee joined Andrew Sentance in dissenting in favor of raising the interest rate until minutes of this month’s two-day meeting are published on July 21st.  CPI inflation of 3.4% has remained stubbornly above the central bank’s upper level of tolerance and failed to drop sharply as happened in other countries that experienced a sharp recession.  The risk is mounting that expected inflation in the longer term may drift upward because the Bank of England’s reluctance to respond to this overshoot.  Against the possibility must be weighed the coming fiscal austerity, which will dampen economic recovery.  In six moves, the Bank Rate was cut between October 2008 and March 2009 from 5.0% to 0.5%.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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