Bank of England to keep policy steady
LONDON: The Bank of England (BoE) looks set to keep its ultra-loose monetary policy unchanged in December in the face of countervailing pressures from rising inflation and euro zone financial turmoil.
The nine-strong Monetary Policy Committee meets on Wednesday and Thursday, and most policymakers are likely to keep a firmly neutral bias as an unexpected upward move in inflation weakens the case for tackling growing threats from the euro zone. None of the more than 60 economists polled by Reuters last week expected a change to the current policy mix of 0.5 percent interest rates and 200 billion pounds of asset purchases that has been in place since February this year. The breakdown of the vote --which will be published on December 22 with the minutes of the MPC meeting --is also expected to remain unchanged from November, as there has been no major shift to the economic outlook since the Bank published its quarterly inflation report last month.
Moreover MPC members Andrew Sentance and Adam Posen both said in recent weeks that they intended to stick with their respective minority calls for a 25 basis point rise in interest rates and a 50 billion pound increase in quantitative easing. "The Bank has relegated policy changes to quarterly inflation report months," said Lloyds economist David Page. "The inflation report and minutes clearly show that the Bank has switched into neutral." The inflation report forecast that consumer price inflation would fall back below its 2 percent target by 2012, once the effect of next year's rise in value-added tax for most goods and services has faded away. Data since the report was published showed that inflation ticked up to 3.2 percent in October from 3.1 percent in September, and that public inflation expectations were starting to rise. -PB News