Bank of England holds interest rate at record-low 0.50%

LONDON: The Bank of England voted on Thursday to hold its key interest rate at a record low 0.50 percent amid turmoil for the British economy and neighbouring eurozone.

"The Bank of England's Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5 percent," the BoE said in a statement after a two-day meeting.

"The Committee also voted to continue with its programme of asset purchases totalling £275 billion (323 billion euros, $432 billion) financed by the issuance of central bank reserves."

Later on Thursday, the European Central Bank is expected to cut its own interest rates as the eurozone teeters on recession, while markets are waiting to see what other action the bank takes to shore up the eurozone.

Investors are also eagerly awaiting the start of a crucial EU summit in Brussels, where European leaders will discuss how to resolve the eurozone debt crisis and prevent the breakup of the euro.

In Britain, the BoE's main interest rate has stood at 0.50 percent since March 2009, when the bank also began injecting £200 billion into the economy under the policy known as quantitative easing (QE).

The Bank of England decided in October to increase the amount by £75 billion, as Britain's economy struggles to recover from recession.

QE is a process whereby central banks create new cash that is used to purchase assets such as government and corporate bonds in the hope of giving a boost to lending and economic growth. It amounts to monetising debt.

However, some analysts argue that quantitative easing -- also widely known as printing money -- stokes inflationary pressures.

Economists said the bank would want to see inflation subside before pumping more cash into the economy.

Source: EconomicTimes