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European Central Bank and Bank of England hold interest rates European Central Bank and Bank of England hold interest rates
(about 1 hour later)
The Bank of England resisted unveiling more emergency measures to support the UK recovery on Thursday, and the European Central Bank also left its rates unchanged.The Bank of England resisted unveiling more emergency measures to support the UK recovery on Thursday, and the European Central Bank also left its rates unchanged.
The Bank's monetary policy committee (MPC) maintained interest rates at a record low of 0.5% and held its quantitative easing (QE) stock at £375bn.The Bank's monetary policy committee (MPC) maintained interest rates at a record low of 0.5% and held its quantitative easing (QE) stock at £375bn.
The no-change decision comes after official figures revealed the economy grew at a bigger-than-expected 1% between July and September, ending the double-dip recession. The decision comes after official figures revealed the economy grew at a bigger-than-expected 1% between July and September, ending the double-dip recession.
The move is likely to fuel expectations that the Bank will no longer resort to QE as a policy tool following hints from both its governor and deputy governor, Sir Mervyn King and Paul Tucker, that its impact is reaching its limit.The move is likely to fuel expectations that the Bank will no longer resort to QE as a policy tool following hints from both its governor and deputy governor, Sir Mervyn King and Paul Tucker, that its impact is reaching its limit.
And minutes from the October meeting of the Bank's MPC suggested that members were divided over the benefits of pumping more emergency cash into the economy. Minutes from the October meeting of the Bank's MPC suggested that members were divided over the benefits of pumping more emergency cash into the economy.
The documents also said some members had questioned the impact that further QE, also known as money printing, would have on the broader economy.The documents also said some members had questioned the impact that further QE, also known as money printing, would have on the broader economy.
The decision is likely to have been a close call for the nine-strong panel after a recent run of weak purchasing managers surveys for the services, manufacturing and construction sectors in October.The decision is likely to have been a close call for the nine-strong panel after a recent run of weak purchasing managers surveys for the services, manufacturing and construction sectors in October.
The surveys gave credence to expert warnings that the underlying health of the economy is much bleaker than the 1% growth in the third quarter suggests.The surveys gave credence to expert warnings that the underlying health of the economy is much bleaker than the 1% growth in the third quarter suggests.
An encouraging start to the Bank's Funding for Lending scheme may have also tipped the balance away from further asset purchases this month with 30 groups, including the five largest banks in the UK, signing up to the £80bn initiative. An encouraging start to the Bank's Funding for Lending scheme may have also tipped the balance away from further asset purchases this month with 30 groups, including the five largest banks in the UK, signing up to the £80bn initiative.
Funding costs have dropped one percentage point, the Bank said, while the number of loans approved for house purchase rose by 2,103 to 50,024 in September.Funding costs have dropped one percentage point, the Bank said, while the number of loans approved for house purchase rose by 2,103 to 50,024 in September.
Consumer prices index inflation has also eased back significantly and, at 2.2% in September, is close to the government's 2% target.Consumer prices index inflation has also eased back significantly and, at 2.2% in September, is close to the government's 2% target.
The European Central Bank held its main interest rate at 0.75% on Thursday, deferring any cut in borrowing costs while it assesses the extent of the eurozone's economic downturn and waits for a cue to use its new bond-purchase programme.The European Central Bank held its main interest rate at 0.75% on Thursday, deferring any cut in borrowing costs while it assesses the extent of the eurozone's economic downturn and waits for a cue to use its new bond-purchase programme.
The bank has said it was ready to buy bonds of debt-strained governments such as Spain and Italy once they had signed up to a European bailout programme. So far no request has been made, but the announcement alone has calmed markets.The bank has said it was ready to buy bonds of debt-strained governments such as Spain and Italy once they had signed up to a European bailout programme. So far no request has been made, but the announcement alone has calmed markets.