Bank Of England Leaves Benchmark Interest Rate, Asset Purchase Program Unchanged

The U.K.’s central bank maintained its benchmark Bank Rate at a record low of 0.5 percent and held its asset-purchase program steady at 375 billion pounds ($614 billion), at a time when the nation continues to outperform all of its major European peers.

The Bank of England’s monetary policy committee, or MPC, had said in August that it would not raise interest rates until the unemployment rate in the country fell to 7 percent. The MPC reached its decisions “in the context of the monetary policy guidance announced alongside the publication of the August 2013 Inflation Report,” the BoE said in a statement on Thursday.

The jobless rate in the U.K. in the third quarter was pegged at 7.6 percent, lower than a consensus forecast of 7.7 percent. Meanwhile, inflation fell sharply to 2.2 percent in October from 2.7 percent in the preceding month, signaling that it could fall below the 2 percent target sooner than previously estimated, amid accelerating economic growth.

“The Monetary Policy Committee’s decision to leave interest rate on hold today should have been both straightforward and unanimous,” Jonathan Loynes, chief European economist at Capital Economics, said in a note.

“The news on the economy has continued to have a fairly solid tone, but probably no more so than the MPC anticipated,” Loynes said. “Indeed, there have been some signs of a slowdown in the growth of high street spending, while the CIPS services activity index fell to a five-month low in November. Meanwhile, the news on price pressures has been benign.”

The BoE cut the key interest rate by 0.5 percentage points to 0.5 percent in March 2009, and according to Loynes, “the first hike will not come until 2016.”