Thursday April 9, 10:14 AM
Bank of England expected to hold rates steady
LONDON (AFP) - The Bank of England was expected Thursday to hold British interest rates at a record low 0.5 percent as it mulls the impact of quantitative easing launched last month to boost the recession-hit economy.
The central bank at its last meeting in March created 75 billion pounds (84 billion euros, 106 billion dollars) of new money and slashed rates yet again in a bid to break the credit crunch and get commercial banks lending again.
"We continue to anticipate rates remaining at 0.5 percent for an extended period of time -- in our forecasts that means until early 2011," said JP Morgan economist Malcolm Barr.
With interest rates close to zero, the Bank of England wants to breathe new life into the battered economy by increasing the money supply.
Under quantitative easing, or QE, the BoE buys government bonds from commercial banks in the hope that the institutions will lend again to businesses and individuals with the cash gained.
The BoE's rate-setting monetary policy committee (MPC) has already won permission from the British government to pump out as much as 150 billion pounds in new money under the QE scheme.
"The MPC decides on interest rates and quantitative easing today," said Trevor Williams, economist at Lloyds TSB Corporate Markets.
"UK benchmark rates are likely to have reached a floor at 0.5 percent and the issue is whether the MPC will vote for any change to the initial 75 billion pounds of asset purchases," he added.
The BoE announcement is expected at around 1100 GMT.
Britain sank into recession in the second half of 2008 due to an international economic crisis that has shattered investor sentiment and battered major economies across the globe.
In reaction, the BoE has slashed its key lending rate in a series of sharp cuts since October as it seeks to lift the economy out of the doldrums.
Meanwhile last week, the European Central Bank cut its key rate by a quarter-point to a fresh record low of 1.25 percent amid a deepening eurozone recession.
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