Bank of England to hold rates

Reported by AAP
Wednesday, July 31, 2013

Currency Converter

Mark BourisMyths bustedHome loans can seem a bit complicated and overwhelming. But it doesn't have to be. Mark Bouris clears up some common misconceptions.

The Bank of England is expected to freeze record-low interest rates amid Britain's strengthening economic recovery, but could signal more stimulus moves, analysts say.

The two-day meeting of the Monetary Policy Committee (MPC), starting on Wednesday, will be the second under governor Mark Carney and follows recent news that the British economy rebounded with 0.6 per cent growth in the second quarter.

Most economists expect the MPC will maintain its so-called quantitative easing (QE) stimulus amount at STG375 billion ($A634.20 billion), and keep interest rates at an historic low of 0.50 per cent.

Canadian Carney made an impressive debut in June when he united the nine-member MPC panel in their decision to refrain from injecting more stimulus cash. The committee had been previously split on the issue since late 2012.

Minutes from the June meeting revealed however that policymakers would study other ways of helping to stimulate fragile economic growth.

In addition, the MPC is also mulling the possible use of "forward guidance", a policy which involves giving a clearer indication of how interest rates might evolve in the short to medium term. This policy could be tied to the unemployment rate, in a similar way to the US Federal Reserve.

However, an announcement on this was not expected until August 7, when the bank will also issue its quarterly economic forecasts.

"The main event this month is likely to be the announcement of formal forward guidance," said Capital Economics analyst Vicky Redwood.

"We expect the Monetary Policy Committee to commit to keep official interest rates low until an unemployment threshold is breached.

"Any commitment will be announced alongside the inflation report on Wednesday August 7, so the meeting itself could pass without event.

"That said, there is an outside chance of a resumption of QE or the start of some other policy action - for example, on bank lending."

31/07/2014 01:11Sydney, Australia. 31 July,2014
advertisement