Bank of England policy makers unanimous in decision to hold rates, asset purchase program

The Associated Press ~ staff The News
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LONDON - Bank of England policy makers were unanimous in their decision earlier this month to keep interest rates steady at 0.5 per cent and leave a 200 billion pound (US$325 billion) asset purchase program unchanged, according to minutes of their monthly meeting released on Wednesday.
The minutes from the Dec. 9-10 meeting showed that all nine members of the Monetary Policy Committee agreed little had changed since November when they expanded the so-called quantitative easing program by 25 billion pounds.
Members had been split over that November decision, with one calling for no expansion and another member advocating a larger 40 billion pound increase.
The minutes of the December meeting said that all nine members agreed that the medium term outlook for inflation and activity had "changed little" since the November decision.
"For those members who had preferred a different policy action at the November meeting, a slightly different scale of asset purchases could still be justified," the minutes said. "But the lack of significant news on the month meant that the case for deviating from the program of asset purchases announced in November was outweighed by the benefits of completing it as planned."
The bank has said it will complete the current asset purchase program, which expands the money supply by essentially creating new money to buy assets, usually gilts, by early February.
Economists don't expect any change in the size of the program until then. Interest rates, meanwhile, are exepcted to remain at the current record low level well into 2010 as Britain makes a slow recovery out of its worst downturn since World War II.
Britain is the only major economy still officially in recession, although both the central bank and the government expect a return to growth in the current fourth quarter.
The hesitant nature of Britain's return to growth was underscored on Tuesday by statistics showing the economy shrank less than previously estimated in the third quarter - but still fell short of economists' expectations for improvement.
In its third and final revision for the July to September quarter, the Office for National Statistics reported that gross domestic product contracted 0.2 per cent.
That was better than earlier estimates that first put the contraction at 0.4 per cent, then 0.3 per cent, but worse than predictions ranging from a 0.1 per cent shrinkage to a 0.2 per cent expansion. A positive figure would have officially ended the recession.
The government has forecast an annual contraction in GDP this year of 4.75 per cent, better than the 5.1 per cent year-on-year measure resulting from the third quarter revised figures. It expects growth next year of 1-1.5 per cent and further growth of 3.5 per cent in each of 2011 and 2012.

Organizations: Bank of England, Monetary Policy Committee, Office for National Statistics

Geographic location: LONDON, Britain, GDP

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