BoE sit tight for November’s key decision
8th October 2009
As expected, the Bank of England held borrowing costs steady at 0.50% in October for a seventh consecutive month and left its quantitative easing programme unchanged at £175bln as it continues to steer Britain’s recession-hit economy towards recovery.
Economic news in recent weeks suggests that the Bank of England’s unprecedented measures may have helped Britain return to growth in the third quarter after suffering its deepest downturn in decades, lessening the need for further stimulus now. Figures on Monday showed the UK’s dominant service sector grew at its fastest pace for two years in September, while brighter consumer morale, rising house prices and signs that banks are becoming slightly more willing to lend reinforce a picture of an economy that is gradually getting back to its feet.
The Central Bank is expected to complete its asset-purchase scheme shortly before November’s policy meeting and economists feel that policymakers will want to wait until November and the publication of the Quarterly Inflation Report before deciding what action to take.
The consensus view is undoubtedly that the uncertainty surrounding both the economic outlook and the impact of asset purchases make it difficult to have a strong view of the scale of QE necessary for boosting nominal spending in the economy. What remains to be seen is whether or not this translates into a further extension of QE in November or not.