BoE votes to maintain rates

May 20, 2009

, LONDON, May 20 – The Bank of England voted 9-0 at a recent meeting to pump out another 50 billion pounds of new money to boost bank lending following the crippling credit crunch, minutes revealed on Wednesday.

The BoE\’s Monetary Policy Committee also voted unanimously on May 7 to keep interest rates at a record-low 0.5 percent as Britain battles its sharpest slowdown in 30 years.

In addition the central bank considered pumping out an additional 75 billion pounds of new money, according to the minutes.

"In light of the outlook for inflation, the Committee agreed to maintain Bank Rate at 0.5 percent and increase the size of asset purchases by 50 billion pounds to a total of 125 billion pounds," the minutes said.

The move to increase the new money supply to 125 billion pounds (142 billion euros, 194 billion dollars) to boost bank lending is a form of monetary policy known as "quantitative easing" or QE.

Under QE, the British central bank buys government bonds from commercial banks in the hope that the institutions will use the money to lend once again to businesses and individuals.

"Committee discussed (at its last policy meeting) the case for increasing the size of the programme by either 50 billion or 75 billion pounds," the BoE said on Wednesday.

"But as the precise amount that would ultimately be required was so uncertain, there was no pressing need for the larger extension at this meeting," it added.

The Bank of England\’s key aim is to keep British annual inflation close to a government-set target rate of 2.0 percent.

Recession-hit Britain\’s 12-month consumer price inflation slowed to 2.3 percent in April while retail prices sank at their fastest pace since records began in 1948, official data showed on Tuesday.

Britain\’s economy likely faces a "slow" recovery, Bank of England head Mervyn King said last week after the BoE described the outlook for British growth and inflation as "unusually uncertain."

The Bank of England has slashed British interest rates six times since October to the current record-low of 0.5 percent.

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