Bank of England holds on quantitative easing and interest rates

http://www.guardian.co.uk/business/2012/apr/05/bank-england-holds-qe-interest-rates

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The Bank of England has chosen to hold off from injecting any extra cash into the economy following tentative signs of a new-year turnaround.

The Bank concluded its latest monthly meeting by leaving interest rates at their record low of 0.5% and making no change to money creation that has already reached £325bn.

No addition had been expected to the programme of quantitative easing (QE), whereby the bank creates money to buy up assets in financial markets to bolster the economy.

Economists are divided over whether there will be any more QE this year but the belief interest rates will stay put throughout 2012 is widespread. Rates have been at the emergency level for more than three years now.

Business surveys have pointed to a pickup in activity in recent months and have been taken as evidence the UK will avoid recession – technically two consecutive quarters of contraction.

Official data earlier on Thursday revealing a surprise drop in factory output tempered optimism somewhat. But after a 0.3% dip in GDP at the end of 2011, there is expected to have been at least some modest growth in the first quarter.

"Unchanged monetary policy in April kicks off what is highly likely to be a fourth full year of interest rates at 0.5%," said Howard Archer, economist at IHS Global Insight.

"Whether or not the Bank of England will eventually do more QE is currently unclear although the case for further stimulus in the near term at least has been diluted by recent overall improved news on the economy."