BoE Retains Key Rate; Raises Asset Purchase By GBP 25 Bln

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The Bank of England retained its key interest rate as expected and raised the size of the quantitative easing measures by GBP 25 billion to pull the economy out of recession.

The Monetary Policy Committee, led by Governor Mervyn King increased the size of the asset purchase scheme by GBP 25 billion to GBP 200 billion. The central bank was widely expected to raise the QE measures by GBP 50 billion. The MPC expects the programme to take three months to complete.

The central bank maintained the official Bank Rate paid on commercial bank reserves at 0.5%. This has been the lowest rate since the central bank was established in 1694. The previous change in rate was a reduction of 0.5 percentage points in March 2009.

Inflation is likely to rise sharply to above the 2% target in the near term, reflecting higher petrol price inflation and the reversal of last year's reduction in VAT, the central bank said. The BoE is set to release the minutes on November 18.

The Bank of England retained its key interest rate as expected and raised the size of the quantitative easing measures by GBP 25 to pull the economy out of recession. (Market News Provided by RTTNews)