Bank of England leaves UK rates unchanged

The Bank of England committed to one more month of asset purchases under its 200 billion pound ($318 billion) quantitative easing policy on Thursday, as widely expected, and kept interest rates at a record-low 0.5 percent.

The central bank had previously indicated that the big decision on the future of its asset-buying program would take place next month.

It will then have updated growth and inflation forecasts, as well as fourth-quarter GDP data which is expected to have confirmed that Britain's economy is out of recession.

Sterling and British government bond prices were little changed after the decision, which had been unanimously expected by economists polled by Reuters.

We believe the BoE has done enough to ensure positive growth again but it will take time for GDP to rise back to its trend level, said George Buckley, economist at Deutsche Bank.

As such we believe the MPC will be cautious in tightening policy particularly given that households will be acutely sensitive to higher rates on account of high debt-to-income ratios, he said.

As expected, the BoE made no statement about the economy in its policy announcement, simply stating like in December that it would review the scale of quantitative easing once existing funds had been spent.

The BoE launched its quantitative easing process -- which uses newly created money to buy financial assets, mostly gilts -- in an unprecedented attempt last March to boost an economy ravaged by a global credit crunch.

Most analysts expect no further expansion of the QE program -- which was expanded by 25 billion pounds in November -- meaning the scheme will end next month.

The economy is now showing signs of revival. House prices are rising and forward-looking surveys point to a recovery.

But it is likely to be some while before policymakers feel confident enough about growth to start raising interest rates.

With sustainable, significant recovery very far from guaranteed, any policy tightening still looks a long way off, said Howard Archer, economist at IHS Global Insight.

We expect interest rates to stay down at 0.50 percent until at least late-2010. Indeed, the Bank of England could very well delay raising interest rates until 2011.

(Reporting by David Milliken and Christina Fincher, Editing by Mike Peacock)