BOE Holds On Policy, UK Manufacturing Up

TheBank of Englandhas opted to keep interest rates at record lows even as inflation remains high, and decided to leave the asset-purchase program unchanged, according to金融时报》. TheMonetary Policy Committeevoted on Thursday to leave the benchmark interest rate at 0.5%, and economists anticipate that the central bank’s balancing act will become even more delicate. Inflation has remained well above the bank’s 2% target rate, even as salaries fail to keep pace with rising prices and employment falters. A rate increase to address high inflation could stifle exports, which is increasingly risky as domestic demand wavers ahead of austerity measures.

The central bank’s policy vote also saw quantitative easing policy unchanged at £200 billion, despite uncertainty over the impact of the government spending cuts on the lagging and uneven economic recovery. However, a separate report from theOffice for National Statisticsshowed a 0.6% monthly increase during November in manufacturing that brought growth for the three-months to November to 5.5% from the same period a year earlier, which is the biggest such gain since 1994. The growth outpaced economists’ estimates, and confirmed forDavid Kernof theBritish Chamber of Commerce, “The manufacturing recovery is gaining momentum.”

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