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British central bank enters into seventh year of ultra-low interest rate

Xinhua, March 5, 2015 Adjust font size:

The Bank of England (BoE) Thursday voted to keep its main interest rate Bank Rate unchanged at 0.5 percent, and kept the quantitative easing (QE) policy at 375 billion pounds (or 572 billion U.S. dollars).

This marks the entry into the seventh year of the British central bank holding the benchmark rate at an ultra-low level. The decision is within the market's estimation consensus.

The BoE cut the interest rate to a record low of 0.5 percent in March 2009 to mitigate impacts brought about by the financial turmoil and euro zone sovereign debt crisis.

The previous change in the size of the quantitative easing policy, or asset purchasing program, was an increase of 50 billion pounds in July 2012 bringing it to the current total of 375 billion pounds.

In late February, Mark Carney, the bank's governor, spoke to the parliamentary treasury committee, saying the current low inflation in Britain was "temporary" and would return to the central bank's target of 2 percent within two years.

But economists here predict that the central bank would not be raising the benchmark interest rate, nor tapering the QE policy, until early next year, as the effects of low inflation might take time to be fully realized.

Martin Beck, senior economic advisor to the EY ITEM Club, commented in a note: "The Monetary Policy Committee (of the BoE) had made it clear that there was no prospect of any change in policy in the short-term. Even the more hawkish members of the committee are keen to see how the current very low rates of inflation feed through to pay settlements before they consider voting for rate hikes again."

The British consumer prices index (CPI) grew by a mere 0.3 percent in the year to January 2015, down from 0.5 percent in the previous month, according to the Office for National Statistics (ONS).

The minutes of this month's policy meeting will be published March 18. Endit