Bank of England Resists Change to Interest Rate
To raise or not to raise, that is the question — in Britain, at least.
On Thursday, nearly a month after two monetary policy makers at the Bank of England broke ranks from the majority and voted to raise interest rates, the central bank voted again to keep rates at historically low levels.
Britain’s central bank said it would keep its benchmark interest rate at 0.5 percent, where it has been since March 2009, as officials try to balance Britain’s economic recovery against anemic wage growth and a muddied geopolitical picture.
The bank also left unchanged a stimulus program of holding 375 billion pounds, or about $617 billion, in government bonds that it has purchased over the past five years.
With rates held steady in the United Kingdom, all eyes are on Europe to see what measures Mario Draghi, the president of the European Central Bank, will announce later Thursday to stimulate Europe’s sluggish recovery, and whether he will pursue quantitative easing.
The International Monetary Fund expects Britain to be the fastest-growing country among the Group of 7 advanced economies this year.
“Despite the build-up in global geopolitical risks (something that may be tempered if the ceasefire announced earlier today in Ukraine holds), UK data remain robust,” Dominic Bryant, a senior economist at BNP Paribas, wrote on Wednesday.
On Aug. 7, the committee at the Bank of England voted 7 to 2 to keep its benchmark interest rate unchanged at a low of 0.5 percent. Members of the committee had been unanimous since July 2011 in their monthly votes to keep rates unchanged.
The central bank said that it expected inflation to be 1.9 percent by the end of the year, up slightly from its May projection of 1.8 percent, both hugging the target of 2 percent. Inflation would remain at slightly lower levels for 2015 and 2016, the bank said. Annual inflation reached 1.9 percent at the end of June, up from 1.5 percent in May.
Source: NYT
