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UK interest rates left unchanged UK interest rates left unchanged
(40 minutes 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.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.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.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.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. 'Wait and see'
"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
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. The CBI business group said the Bank's latest decision would have been "a tricky one", given that both official and survey data continued to present "a mixed picture" of the economy.
A recent poll of economists by Reuters showed 25% of those asked thought the MPC would vote for more QE.
"It seems that a 'wait and see' position has been adopted for the moment," said Anna Leach, the CBI's head of economic analysis.
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
"The ongoing crisis in the euro area will continue to put pressure on fragile business conditions for the foreseeable future. But we still expect the UK economy to improve modestly later in the year, with further falls in inflation providing some support to family incomes."
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.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.UK retail sales values were up 1.3% on a same-stores basis from May last year, boosted by a burst of fine weather.