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Bank of England Leaves Benchmark Interest Rate at Record Low Bank of England Leaves Benchmark Interest Rate at Record Low
(30 minutes later)
LONDON — The Bank of England kept its benchmark interest rate unchanged on Thursday amid concern that Britain’s economy fell back into a recession at the beginning of the year.LONDON — The Bank of England kept its benchmark interest rate unchanged on Thursday amid concern that Britain’s economy fell back into a recession at the beginning of the year.
The British central bank decided to leave its interest rate at the record low of 0.5 percent, where it has been since March 2009. The bank also held its program of economic stimulus at £375 billion, or about $560 billion.The British central bank decided to leave its interest rate at the record low of 0.5 percent, where it has been since March 2009. The bank also held its program of economic stimulus at £375 billion, or about $560 billion.
The Bank of England governor, Mervyn E. King, who is to be replaced by Mark J. Carney of the Bank of Canada in three months, has been pushing for more fiscal stimulus this year to help the economy grow, but was overruled by other members of the central bank’s interest rate setting committee.The Bank of England governor, Mervyn E. King, who is to be replaced by Mark J. Carney of the Bank of Canada in three months, has been pushing for more fiscal stimulus this year to help the economy grow, but was overruled by other members of the central bank’s interest rate setting committee.
The concern is that more stimulus would weigh on the pound, which in turn would fan inflation that is already above the central bank’s 2 percent annual target. Inflation is currently at 2.8 percent.The concern is that more stimulus would weigh on the pound, which in turn would fan inflation that is already above the central bank’s 2 percent annual target. Inflation is currently at 2.8 percent.
Disappointing manufacturing data, apprehensive consumers and concern about the impact of the crisis in Cyprus mean that many economists still expect the Bank of England to expand its bond purchasing program later this year.Disappointing manufacturing data, apprehensive consumers and concern about the impact of the crisis in Cyprus mean that many economists still expect the Bank of England to expand its bond purchasing program later this year.
“The economy is going nowhere,” said Vicky Redwood, an economist at Capital Economics in London. “There’s essentially no growth.”“The economy is going nowhere,” said Vicky Redwood, an economist at Capital Economics in London. “There’s essentially no growth.”
Later on Thursday, the European Central Bank president, Mario Draghi, is expected to face questions about the situation in Cyprus when he holds his monthly press conference in Frankfurt, following an interest rate announcement. The E.C.B.’s benchmark rate is at a record low of 0.75 percent.
Economic data released in three weeks is to show whether Britain fell back into a recession in the first quarter for the third time in five years. Consumers curbed spending as the government’s austerity measures, which include spending cuts and tax increases, raised concern about unemployment. Higher costs for electricity during an unusually long winter further squeezed households.Economic data released in three weeks is to show whether Britain fell back into a recession in the first quarter for the third time in five years. Consumers curbed spending as the government’s austerity measures, which include spending cuts and tax increases, raised concern about unemployment. Higher costs for electricity during an unusually long winter further squeezed households.
Many companies are reluctant to spend as long as bank loans are difficult to come by and the outlook for demand especially from the euro zone, Britain’s largest export market, is difficult to predict.Many companies are reluctant to spend as long as bank loans are difficult to come by and the outlook for demand especially from the euro zone, Britain’s largest export market, is difficult to predict.
George Osborne, the chancellor of the Exchequer, warned last month when he updated Parliament on the state of the economy that “another bout of economic storms in the euro zone would hit Britain’s economic fortunes hard again.”George Osborne, the chancellor of the Exchequer, warned last month when he updated Parliament on the state of the economy that “another bout of economic storms in the euro zone would hit Britain’s economic fortunes hard again.”
The Office for Budget Responsibility in March halved its forecast for Britain’s economic growth to 0.6 percent this year from 1.2 percent forecast earlier. Growth will be 1.8 percent next year, down from a previous estimate of 2 percent, the office said.The Office for Budget Responsibility in March halved its forecast for Britain’s economic growth to 0.6 percent this year from 1.2 percent forecast earlier. Growth will be 1.8 percent next year, down from a previous estimate of 2 percent, the office said.
Cold weather was partly to blame for a contraction in the construction industry in March, the fifth consecutive month, according to Markit Economics. Disposable income dropped 0.1 percent in the fourth quarter from the previous three months, the Office for National Statistics said last month.Cold weather was partly to blame for a contraction in the construction industry in March, the fifth consecutive month, according to Markit Economics. Disposable income dropped 0.1 percent in the fourth quarter from the previous three months, the Office for National Statistics said last month.