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Roundup: Bank of England maintains ultra-low interest rate

Xinhua, February 6, 2015 Adjust font size:

The Bank of England (BoE), the central bank of Britain, voted Thursday to maintain the bank rate, the benchmark interest rate, at 0.5 percent.

The bank also voted to maintain the stock of purchased assets, or quantitative easing policy scheme, at 375 billion pounds (about 570 billion U.S. dollars).

Last month, data from the UK's Office for National Statistics (ONS), showed the British inflation rate fell to 0.5 percent in the year leading up to December 2014, marking an almost 15-year low. The main contributions to the decline came from low oil prices.

The falling inflation made some analysts believe the BoE would not raise the rate this year.

During the bank's monetary policy meeting last month, nine policy makers of the BoE's Monetary Policy Committee (MPC) unanimously voted to keep the benchmark interest rate on hold. But over the past months, there was a decision split among the MPC.

The previous change in the bank rate was a reduction of 0.5 percentage points to 0.5 percent on March 5, 2009. A program of asset purchases financed by the issuance of central bank reserves was initiated on that day. The previous change in the size of that program was an increase of 50 billion pounds to the current level on July 5, 2012, noted the bank.

"An interest rate rise in the immediate future still looks very unlikely, but could well come back on the agenda later this year once the risk of a prolonged period of falling prices has diminished," said Vicky Redwood, the chief British economist at Capital Economic, an economic research consultancy.

Redwood believed inflation would remain well-contained, and the situation would make monetary policy remain loose to lessen the impact of the fiscal austerity.

"With inflation on course to average close to zero in 2015, today's decision by the MPC to was eminently justified and far from a surprise," said Martin Beck, senior economic adviser to the EY ITEM Club, an independent economic forecasting group.

"Granted, recent comments by Mark Carney (the governor of BoE) have suggested that investors may be too sanguine on the timing of an interest rate rise. But we remain of the view that there won't be an interest rise in 2015," said Beck. (1 pound = 1.52 U.S. dollars) Endit