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UK interest rates left unchanged | |
(about 1 hour later) | |
The Bank of England has once again left UK interest rates unchanged at 0.5% and announced no expansion to its quantitative easing (QE) programme. | |
QE is the Bank's scheme which aims to boost the economy by buying bonds. The stimulus currently stands at £325bn. | |
The Bank's Monetary Policy Committee (MPC) have held rates at its current record low for more than three years. | |
Earlier, a closely watched survey showed that the UK's services sector grew at a steady pace in May. | |
Analysts had expected a slowdown, which would have led the MPC to be more likely to consider further stimulus. | Analysts had expected a slowdown, which would have led the MPC to be more likely to consider further stimulus. |
The Markit/CIPS purchasing managers' index came in at 53.3 in May, the same as in April. Any reading above 50 implies growth in the sector. A reading of 52.2 had been forecast. | The Markit/CIPS purchasing managers' index came in at 53.3 in May, the same as in April. Any reading above 50 implies growth in the sector. A reading of 52.2 had been forecast. |
"By implication I guess that it reduces the prospect of QE at lunchtime, but I don't think it eliminates it by any means," Adam Chester, economist at Lloyds, said ahead of the MPC's announcement. | |
"The Bank of England will be looking at a host of factors - principally the crisis in the eurozone and the challenging economic environment. It's nothing to get too gung ho about, but it's not as bad as feared." | "The Bank of England will be looking at a host of factors - principally the crisis in the eurozone and the challenging economic environment. It's nothing to get too gung ho about, but it's not as bad as feared." |
Euro strains | Euro strains |
The UK economy has been shown to be deeper in recession than was thought when the MPC last met a month ago. | The UK economy has been shown to be deeper in recession than was thought when the MPC last met a month ago. |
But a recent poll of economists by Reuters showed just 25% of those asked thought it would vote for more QE. | But a recent poll of economists by Reuters showed just 25% of those asked thought it would vote for more QE. |
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full | Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms: AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full |
Recently the International Monetary Fund's managing director, Christine Lagarde, said the Bank of England should consider lowering interest rates further to help the UK weather the eurozone debt crisis. | Recently the International Monetary Fund's managing director, Christine Lagarde, said the Bank of England should consider lowering interest rates further to help the UK weather the eurozone debt crisis. |
The IMF also advocated an expansion of its quantitative easing programme. It has so far agreed to pump a total of £325bn into the economy through QE. | The IMF also advocated an expansion of its quantitative easing programme. It has so far agreed to pump a total of £325bn into the economy through QE. |
Last week, the Bank's chief economist, Spencer Dale, said the economy was still feeling the benefit from the QE already conducted by the Bank. | Last week, the Bank's chief economist, Spencer Dale, said the economy was still feeling the benefit from the QE already conducted by the Bank. |
He also predicted the economy would grow this year and said that inflation - which has been falling sharply in recent months and now stands at 3% - needs to come down further. | He also predicted the economy would grow this year and said that inflation - which has been falling sharply in recent months and now stands at 3% - needs to come down further. |
Meanwhile, a survey from the British Retail Consortium (BRC) gave a positive picture of the High Street. | |
UK retail sales values were up 1.3% on a same-stores basis from May last year, boosted by a burst of fine weather. |