As predicted by the majority of economists, Bank of England Governor Mervyn King and his Monetary Policy Committee refrained from injecting the UK economy with further stimulus.
Although the minutes of the meeting will not be published until nearer the end of the month it appears that of the nine committee members eight felt that additional quantitative easing was unnecessary at the present time.
Despite the UK economy teetering on the edge of a triple-dip recession indications that the British central bank’s credit boosting programme is having positive effects prevented the policy makers from adding to the 375 billion pound target for quantitative easing.
In light of the success seen so far with the BoE’s Funding for Lending Scheme some economists are in agreement with the committee’s decision.
An economist with Investec Securities asserted: ‘We characterise recent economic data as mixed rather than gloomy and share some of the MPC’s optimism over the potential effects from the FLS. Accordingly we consider the chances that the committee sanctions more QE to be less than 50-50.’
However, other industry experts believe that with the UK economy continuing to falter and US debt ceiling concerns/the ongoing debt crisis in the Eurozone weighing on economies globally, the BoE may well have to implement further stimulus in the not-too-distant future.
As one economist with London-based IHS Global Insight stated: ‘Most MPC members seemingly believe that there is currently not a compelling case for QE, for now at least [however] with the economy likely to continue to struggle to generate significant, sustainable growth, we expect the Bank of England to eventually give the economy a further helping hand’.
The BoE also kept the key interest rate at 0.5 per cent.
Following the announcement the Pound continued to trade 0.2 per cent higher against the US Dollar than yesterday.
As of 13:25 pm
The Pound to Euro exchange rate is currently trading at 1.2228
The Pound to US Dollar exchange rate is currently trading at 1.6047
The Pound to Australian Dollar exchange rate is currently trading at 1.5173
The Euro to US Dollar exchange rate is currently trading at 1.3118
The Euro to Pound exchange rate is currently trading at 0.8175
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