The Bank of England refrained from adding to stimulus as policy makers kept focus on a credit- boosting program to aid the recovery.
The Monetary Policy Committee led by Governor Mervyn King said the target for its bond purchases will remain at 375 billion pounds ($589 billion). All 43 economists in a Bloomberg News survey forecast no change. The BOE also said it will reinvest proceeds of 6.6 billion pounds from gilts it holds that mature next month. The bank also said that inflation will exceed the 2 percent target for the next two years.
Today’s decision came as Bank of Canada Governor Mark Carney, who will succeed King in July, testified to U.K. lawmakers on matters ranging from his thoughts on inflation targeting to the size of his pay. While Britain’s economy shrank in the fourth quarter, tipping it toward an unprecedented triple-dip recession, surveys in January suggest it might be spared as both manufacturing and services showed expansion.
“The economy shrinking is bad news, but that being said, the bank had signalled that they were expecting a bad number,” said Rob Wood, an economist at Berenberg Bank in London and a former Bank of England official. “We’re likely to get a few months of inactivity.”
The MPC also kept its benchmark interest rate at a record- low 0.5 percent today, as predicted by all 54 economists in another Bloomberg survey. Officials are monitoring the impact of their Funding for Lending Scheme, which started in August and is aimed at boosting credit. There are signs the program is helping the mortgage market, and King said on Jan. 22 that lending conditions should improve further as it “kicks in.”