Bank of England Holds Line on Interest Rate, Continues Asset Purchase

As expected, the Bank of England voted to maintain the current 0.5 percent interest rate and also pledged to continue buying gilts (debt securities issued by the British government) as part of its 200 billion pound ($318 billion) quantitative easing policy. Many analysts however, believe the Bank will wind down its spending early in the new year if signals point to a strengthening of the economy.

“We believe the BoE has done enough to ensure positive growth again but it will take time for GDP to rise back to its trend level,” said George Buckley, economist at Deutsche Bank.

“As such we believe the MPC will be cautious in tightening policy particularly given that households will be acutely sensitive to higher rates on account of high debt-to-income ratios,” he said.

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