Belfast Telegraph

Bank of England ponders 'forward guidance' as rates and QE unchanged

By John-Paul Ford Rojas

The Bank of England has left interest rates unchanged as it kept the City waiting on fresh measures to stimulate the recovery.

Rates were held at their historic low of 0.5% and the Bank's quantitative easing (QE) programme of pumping money into the economy stayed at £375bn.

An announcement on whether it will adopt a policy of "forward guidance" on the future path of rates will not be made until next week.

Figures last week showing that gross domestic product (GDP) growth had doubled to 0.6% eased pressure on the Bank's Monetary Policy Committee (MPC) to take further stimulus measures this time. But GDP remains 3.3% below pre-recession levels and the MPC has said the recovery is "weak by historical standards".

It means that under new governor Mark Carney, considered an activist on monetary policy, the Bank is considered likely to pursue measures to speed the upturn towards "escape velocity".

A formal decision on whether it will adopt a policy of forward guidance – a tool used by central bankers to reassure markets about the future path of interest rates – is due to be announced next Wednesday.

Policymakers did not repeat last month's surprise move of issuing a statement alongside their decision – which followed the first meeting under Mr Carney's tenure.

On that occasion, all nine members of the MPC, including the governor, voted against an increase in quantitative easing.

But they also caught markets unawares by issuing comments that indicated interest rates would not be rising from their current level for some time to come – sending share prices soaring.

It was seen as a first tentative step towards forward guidance, ahead of next week's formal decision.

Belfast Telegraph

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