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LONDON: The Bank of England froze its key lending rate on Thursday at a record low level of 0.50 percent, where it has been for a year, as Britain looks to strengthen its recovery from a record recession.
The BoE also decided against pumping more new money into the British economy. Both decisions following a regular two-day policy meeting had been widely expected by markets.
"The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.50 percent," the central bank said in a statement.
"The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at 200 billion pounds" (221 billion euros, 302 billion dollars).
Also on Thursday, the European Central Bank kept its main interest rate at a record low point of 1.0 percent, as markets awaited comment by ECB president Jean-Claude Trichet on the bank's unconventional lending policies.
"With considerable uncertainty still surrounding the economic outlook, the BoE is likely to remain in 'wait and see' mode for some time yet, in order to gauge the strength of the recovery and the risks to inflation," Daiwa Capital Markets Europe economist Colin Ellis said following Thursday's decisions.
Reasons behind the BoE decisions will be revealed in minutes of its latest monthly meeting to be published on March 17.
The BoE held firm on Thursday in the wake of recent official data showing that Britain emerged from a record recession stronger than expected.
Britain emerged from recession in the fourth quarter with growth of 0.3 percent, the Office for National Statistics (ONS) said last week.
The ONS had originally estimated growth of only 0.1 percent during October-December 2009 following a recession that lasted six quarters - the country's longest on record. It revised the data last week.
It is meanwhile exactly one year since the BoE's monetary policy committee decided to slash British borrowing costs to 0.50 percent - the lowest level since the British central bank was established in 1694.
Also in March 2009, the BoE launched quantitative easing (QE) - a radical form of monetary policy that saw the central bank pump up the economy with 200 billion pounds of new money.
It did this by purchasing bonds from commercial institutions, with the aim being to encourage banks to increase lending to businesses and individuals.
The BoE last month decided to freeze its QE plan but refused to rule out revisiting the asset purchases programme should Britain's economy struggle to build on its recovery.
Charles Davis, a senior economist at independent consultants the Centre for Economics and Business Research said the BoE was likely to sit tight until after Britain's general election, which will reportedly be held on May 6.
"The key variable ahead is what action the government of the day decides to take on the public sector deficit after the election," he said.
"In many ways, monetary policy is in limbo until the scale and pace of fiscal tightening becomes clear. This uncertainty has led to markets becoming increasingly edgy about the United Kingdom economy - with sterling sliding to a ten-month low against the dollar on Monday.
"It is clear that both the Bank of England and markets are in need of clarity on the policy mix ahead," Davis added. - AFP/de
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