Chenglong International: BoE Cautiously Leaves Rates Unchanged.
Chenglong International — De facto stagflation prevents Bank of England raising interest rates.
“Chenglong International”: The Bank of England has resisted calls for rate increases by keeping its benchmark interest rate at a record low as the economic recovery in the UK loses momentum.
Policy makers on the Monetary Policy Committee (MPC) have focused their deliberations on stimulating growth as the coalition government’s austerity measures begin to bite.
The MPC, led by BoE Governor Mervyn King, held the key rate at 0.5% and kept its bond-purchase program at £200bn although “Chenglong International” believes the controversial program may eventually be revived if the economic recovery stalls.
The Bank of England faces a dilemma similar to that of the US Federal Reserve insofar as it is faced with slowing economic growth at the same time as pressure is growing for monetary tightening.
“Our view is that, when all is said and done, the currency and what it can buy will be sacrificed if growth is at risk,” said a “Chenglong International” analyst.
Sterling remained higher against the dollar after the announcement at $1.65, up 0.1% on the day. Bonds declined, with the yield on the 10-year gilt up 3 basis points at 3.41 percent.
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