Bank declines to turn on monetary taps

 

The Bank of England declined to pump more stimulus into the economy yesterday, despite signs that the GDP bounce registered in the third quarter of the year is fading.

The Monetary Policy Committee announced there would be no additions to the £375bn pile of government bonds that it has purchased since 2009 in order to support spending.

The MPC also kept interest rates at their record low of 0.5 per cent.

Some analysts had predicted that the MPC would vote for a £25bn increase as surveys of puchasing managers (PMIs) in the construction, manufacturing and services sectors over the past week have pointed to slowing momentum.

The economy grew by a healthier than expected 1 per cent between July and September, according to the Office for National Statistics, although some of this was due to temporary factors such as Olympic ticket sales.

"If the recent trend in the PMIs continues, then further easing would seem likely," said George Buckley of Deutsche Bank.

The European Central Bank also kept monetary policy on hold yesterday, despite multiplying expectations of a deterioration in the eurozone. Its main interest rate was kept at 0.75 per cent. The European Commission this week cut its 2013 growth forecast for the 17-member bloc from 1 per cent to just 0.1 per cent. The ECB's president, Mario Draghi, hinted that the Bank is preparing to downgrade its own forecasts next month.

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