British central bank keeps rates on hold

The Bank of England (BoE) voted Thursday 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 555 billion U.S. dollars).

The decision is within the market's estimation consensus, as a further slowdown in inflation is taking place in Britain.

The British inflation rate fell to zero in February, the lowest reading since records began, taking a further step towards deflation, said the Office for National Statistics (ONS). Economists believed the zero inflation rate would ease pressure on the BoE to hike the rate.

Martin Beck, senior economic adviser to the EY ITEM Club, commented in a note: "The decision by the Monetary Policy Committee (MPC) to keep interest rates unchanged was eminently predictable and the committee's vote was almost certainly unanimous. With no rise in consumer prices in February, March's CPI reading likely to flirt with deflation, pay growth remaining anaemic, and falling import costs, there is no case for a rise in Bank Rate."

"With the MPC alert to the dangers of inflation becoming stuck below the 2.0 percent target, the government won't need to worry about a rise in interest rates for some time to come, regardless of which party is in power following the general election. We stick to our view of 'no change' until well into 2016," said Beck.

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. Endit