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Bank of England Fails to Expand Asset Purchases

Simon Dawson | Bloomberg | Getty Images

The Bank of England kept its benchmark interest rate unchanged at 0.5 percent and maintained the size of its asset purchase program at 375 billion pounds on Thursday.

The pound rose to 1.5061 against the dollar after the news.

While most analysts had expected the BoE to keep policy unchanged, some analysts were braced for a surprise after minutes from the bank's last meeting showed three of the nine committee members had voted in favor of expanding bond buying by a further 25 billion pounds ($38 billion).

Amid fears of a triple-dip recession, the bank's deputy governor Paul Tucker last month went so far as to suggest negative interest rates on money parked at the central bank in order to encourage the financial system to step up lending.

"The decision this month was obviously to hold, it doesn't mean that next month they won't go and buy another 25 billion [pounds]," Marcus Ashworth, head of fixed income at Espirito Santo Investment bank said.

The pound has weakened in recent months after weak economic data and expectations of further quantitative easing. HSBC warned earlier this week, the currency could get "smoked" from new monetary stimulus. But Jan Randolph, head of sovereign risk at IHS global insight said the pound weakness might have actually helped the BoE stand pat.

"They are probably hoping that the recent weakness of the sterling may help in delivering some export-led growth, but quite frankly there's very lackluster export growth out there to pinch from others," he told CNBC.

The incoming head of the Bank of England, Mark Carney is expected to look at further ways to ease policy when he takes over in July.

On Thursday, the Financial Times reported the U.K. finance minister is set to give Carney more powers in order to usher in a "new era of looser monetary policy."

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