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Bank of England Holds Rates Steady

By Marlene Y. Satter

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The Monetary Policy Committee of the Bank of England voted Thursday to hold interest rates paid on commercial bank reserves unchanged at 0.5%. Members of the committee also voted not to make any changes in the bank’s quantitative easing program, which is currently set at 200 billion pounds $317 billion). The QE policy has been in place since February.

According to a Reuters report, England’s economic outlook has not changed much since the meeting of the committee in November; its consumer price inflation has increased from its 2% target to 3.2%. Manufacturing activity has been strong, and overall economic growth has been strong at 0.8% in Q3.

The committee’s vote still appeared to be divided, with Andrew Sentance saying he still felt there was a need to raise interest rates and Adam Posen calling for an additional 50 billion pounds of new funding for purchase of assets. However, minutes of the meeting will not be released until Dec. 22.

BoE forecast in November that it would take till early 2012 for inflation to return to its target level, partially due to a rise of 2.5% in the value-added tax on most goods and services that will take effect in January of 2011.