Bank of England Holds Monetary Stance

(MENAFN– ecpulse) The Bank of England decided to hold its monetary stance in March amid signs of remarkable improvement in the British economy and following the recent change in the bank’s forward guidance

The BOE opted to keep its monetary stance this month by holding interest rate at 0.50 percent and amount of asset purchases at 375 billion pounds.  

Signs Of Progress

The recent data has signaled recovery is moving on the right track, raising expectations the U.K. would be among the first developed nations to fully recover from the repercussions of the financial crisis.

A report released this week signaled that U.K. manufacturing activity soared for the 11th month in a row in February.

The European Commission upgraded its forecast for Britain as it now foresees a growth of 2.5 percent this year, instead of the previous of 2.2 percent while kept its 2015 forecast at 2.4 percent expansion.

“Growth is likely to continue to come almost exclusively from domestic demand ... and investment playing a more important role as time progresses,” the Commission said. 

Fears Of Setback

The BOE preferred to change the forward guidance to continue its bolster to recovery, which may be affected by the instability in the euro area, emerging markets rout and slowdown in U.S. recovery.

The British growth eased in the last quarter last year to 0.7 percent from 0.8 percent in the previous three months.

ILO unemployment for the three months through December unexpectedly rose to 7.2 percent, marking its first surge since February last year, from a prior of 7.1 percent.

The BOE decided in August to keep interest rates at record low levels until an unemployment threshold of 7 percent is reached.

CPI for the year ended January retreated below the BOE target of 2 percent for the first time since 2009 to 1.9% from 2.0% in December.

Inflation reached BOE target for the first time since 2009 as CPI for the year ended December dropped to 2.0% from 2.1% in November.

Change In Guidance

Last month, the BOE decided to link its interest rate hike to other measures such as business surveys and the number of hours worked, instead of an unemployment threshold of 7 percent.

“There was a scope to absorb spare capacity further,” before hiking interest rate, minutes for February’s meeting said.

"Interest rates will have to rise at some point but not yet. And when they do they will rise very gradually and cautiously to make sure we continue to nurture the recovery we have seen in output growth and employment," said MPC member Spencer Dale.