The Bank of England shrugged off fears of a triple-dip recession today as it held fire on pumping billions extra into the UK’s flat-lining recovery
The decision leaves its quantitative easing money-printing programme unchanged at £375 billion four years after the monetary policy committee embarked on quantitative easing. Interest rates, held again today at 0.5%, have also been lodged at their present record low since March 2009.
The vote is likely to have been a nail-biter after three of the nine-member committee, including Governor Sir Mervyn King, pictured, voted to inject another £25 billion into the economy in February. Despite a buoyant start to the year for stock markets on both sides of the Atlantic — and inflation well above the Bank’s 2% target at 2.7% — the economy has been in reverse for four of the past five quarters after shrinking another 0.3% between October and December. Output remains 3% below its pre-recession peak almost five years ago.
More timely industry surveys meanwhile suggest that the economy is on course to grow a meagre 0.1% in the present quarter — missing the dreaded triple-dip by only the narrowest of margins.
Although the UK’s dominant services firms enjoyed a better February, inconclusive elections in Italy have raised the spectre of a new phase in Europe’s debt woes. Automatic spending cuts in America threaten prospects for the world’s biggest economy this year.
The decision comes as Threadneedle Street — expected to shoulder the burden of reviving the economy as Chancellor George Osborne sticks to deficit-cutting plans — looks increasingly desperately for ways to spur growth.
Its Funding for Lending Scheme has been slow to make an impact on business credit and deputy Governor Paul Tucker has floated the idea of charging banks on their reserves at the central bank to encourage lending although fellow deputy Charlie Bean called this “blue-sky thinking”.
The MPC has held policy unchanged since July last year, when it voted for a £50 billion increase as fresh eruptions in the eurozone hit financial markets and sapped growth prospects at home.