The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.
The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £375 billion.
The Committee's latest inflation and output projections will appear in the Inflation Report to be published at 10.30am on Wednesday 14 November.
Barry Naisbitt, Chief Economist at Santander UK, said:
"The decision to keep rates and quantitative easing on hold today came as no real surprise to markets and commentators after the first estimate of GDP in the third quarter of this year showed a stronger than anticipated rebound of 1%. However, the underlying rise in GDP was weaker than the headline and the latest indicators of economic activity for October do not show a strong picture. These activity trends continue to be mixed - stronger for the service sector than for manufacturing industry. So it would be no surprise to find that some Monetary Policy Committee (MPC) members voted to extend the quantitative easing programme.
"While the MPC will be continuing to monitor the economic signs closely to decide whether it considers it necessary to provide any further policy boost in the months ahead, commentators' attention will now turn to the economic projections in the Inflation Report and the Chancellor's Autumn Statement."
Ian Kernohan, Economist at RLAM, commented:
"Following the very strong GDP figure last month, some recent economic data has been weaker, although there seems to be a much more vigorous debate within the MPC about the potency of QE as the main plank of policy going forward."
Schroders' European Economist Azad Zangana comments:
"The Bank of England has decided to keep interest rates at the record low level of 0.5 per cent, but has also decided not to extend its quantitative easing (QE) programme which expired this month at £375 billion.
"Based on recent speeches, it seems that the Monetary Policy Committee has changed its view on the effectiveness of QE in boosting demand in the economy. The stronger than expected GDP figures for the third quarter will have influenced the decision, although at the same time, weaker than expected business surveys and industrial production data for September warrant caution. In addition, the inflation outlook has become less favourable with higher food price inflation and unexpected hikes in household energy bills.
"We expect today's announcement to mark a pause in QE rather than an end to the programme. The Bank of England's growth forecast for 2013 and 2014 remain too optimistic, which could lead the Bank to restart its asset purchase programme. However, if the Government's Funding for Lending Scheme gains traction in boosting lending and demand in the economy, then the Bank may instead favour this form of stimulus over the purchase of Gilts."
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