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No Policy Change Expected at BOE

H.S. Borji
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No Policy Change Expected at BOE

The Bank of England is expected Thursday to keep monetary policy unchanged, as accommodation is still needed to nurse the UK economy back to health.

The nine-member Monetary Policy Committee voted unanimously last month to keep interest rates at 0.5 percent and the pace of quantitative easing at £375 billion. The Bank rate has held at 0.5 percent since 2009.

The MPC likely won’t raise interest rates until 2015. Central bank officials are still concerned about the uneven pace of recovery. To-date, the UK’s resurgence has been dominated by consumer spending and a booming housing sector. The UK’s weak export recovery has raised concerns about the strength of the pound, which has dominated the forex market over the past six months. According to the Bloomberg Correlation-Weighted Indexes, sterling has strengthened 4.8 percent in the past six months, making it the best performer among ten developed-nation currencies.

While economic data have been mixed recently, the UK economy is outpacing expectations, according to the latest estimate from the National Institute of Economic and Social Research showing UK GDP expanded 0.9 percent in the first quarter. The Office for National Statistics will report official first quarter figures at the end of the month.

The International Monetary Fund said on Tuesday the UK economy will expand 2.9 percent this year and 2.5 percent next year, up from the January estimate.

In currency news, the pound was well supported leading up to the release of the March 18-9 Federal Open Market Committee meeting minutes. Cable was trading at 1.6790, up nearly 0.3 percent.

The pound was weaker versus the euro. The EURGBP pair rose more than 0.1 percent to 0.8248 after trading within a narrow range.

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