BOE maintains rate, stock of assets, as expected

    The Bank of England (BOE) maintained its benchmark Bank Rate at 0.5 percent along with the 375 billion pounds of assets that it has purchased since the global financial crises, a decision that was widely expected.
     The BOE, which has kept its rate at technically zero since March 2009 to help the economy recover, added that it would reinvest 4.35 billion pounds of cash from the redemption of the January 2015 gilt - as United Kingdom government bonds are known as - that is being held by the BOE.
    Minutes of today's meeting by the BOE's Monetary Policy Committee (MPC) will be published on Jan. 21.
    Two of the nine members of the MPC have already voted five times to raise the BOE's bank rate by 25 basis points, arguing that the central bank should raise rates before higher wages start to push up inflation.
    But the other members have argued that there are few signs of inflationary pressure and the drop in oil prices are likely to keep inflation lower than previously expected.
    The U.K. consumer price inflation rate fell to 1.0 percent in November from 1.3 percent in October, well below the BOE's 2.0 percent target. In the minutes from the MPC's December meeting, the majority of its members said inflation was likely to fall to less than 1.0 percent in December.
   Mark Carney, governor of the BOE, has said that the decline in oil prices was positive for the U.K. economy and the central bank would look through the impact of oil on inflation.

    In its November inflation forecasts the BOE lowered its growth and inflation forecast due to the "specter of economic stagnation" in Europe and softer global growth.
    In response, financial markets pushed back their expectations for the BOE to raise its rate to late 2015.
    The BOE lowered its forecast for 2015 growth to 2.9 percent from 3.1 percent forecast in August and its 2016 forecast to 2.6 percent from 2.8 percent.
    In the third quarter of last year, the U.K. Gross Domestic Product expanded by 0.7 percent from the second quarter for annual growth of 2.6 percent, the same rate as in the second quarter.
    The U.K. unemployment rate remained steady at 6.0 percent in the three months to October.
   
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