UK Rates and Bond Plan on Hold

Arthi Gupta
10 May, 2010
New York City

The Bank of England on Monday decided to hold its interest rate at a record low and maintain its bond purchase program at

[R]5:50 PM London, UK - The Bank of England on Monday decided to hold its interest rate at a record low and maintain its bond purchase program at £200 billion as expected amid the uncertainty over the formation of a new government.[/R]

The Bank of England on Monday decided to hold its interest rate at a record low and maintain its bond purchase program at £200 billion as expected amid the uncertainty over the formation of a new government.

The Bank of England is waiting for the new government that has still not been formed after five days of election and hectic parleying among the three parties to determine budget cuts.

The nine-member Monetary Policy Committee maintained the official Bank rate paid on commercial bank reserves at 0.5%. The previous change in the rate was a reduction of 0.5 percentage points on March 2009.

Policy makers, led by Governor Mervyn King, also voted not to change the size of the stock of asset purchases financed by the issuance of central bank reserves from its current £200 billion.

Earlier in the day, E.U. finance ministers had agreed emergency measures worth up to €500 billion to stop the Greek debt crisis from spilling over to other countries in the euro area. The International Monetary Fund will also participate in the mechanism and provide at least €250 billion in support. Separately, the European Central Bank confirmed that it will for the first time buy both public and private sector debt within the euro-zone to protect the common currency.