Bank keeps rates at a record low in spite of new mandate

Marion Dakers
THE BANK of England stopped short of using its new powers yesterday, opting to hold interest rates at 0.5 per cent and the asset purchase scheme at £375bn at its monthly meeting.

George Osborne changed the central bank’s mandate in the Budget last month, giving it permission to allow inflation to overshoot its two per cent target for the good of the wider economy.

He also granted the Bank the right to make long-term commitments to the interest rate, along the lines of the Federal Reserve.

“This is more likely to be implemented by [incoming governor] Mark Carney when he takes over in July given his previous use of it in Canada,” said James Knightley at ING.

The Bank’s nine-member monetary policy committee yesterday held the base rate for the 49th straight month, as expected.

Details of members’ votes will be published on 17 April. Outgoing governor Sir Mervyn King and two others called for restarting the Bank’s asset-buying programme in February and March.

“Recent economic data continues to be pretty mixed and will have done little to resolve the debate around the merits of loosening policy further,” said Stephen Gifford, the CBI’s director of economics.

“While muted growth prospects and international uncertainty will keep open the possibility of further QE, the persistence of above-target inflation may act as a bar to looser policy.”