BoE leaves rates, asset purchase target unchanged
The Bank of England kept left interest rates at a record low of 0.5 percent and its asset purchase target unchanged at £375 billion as expected on Thursday.
"Unchanged monetary policy from the Bank of England was a stone dead certainty, and policy looks set to remain on hold for some considerable time to come – barring a nasty accident on the U.S. debt front," Howard Archer, Chief UK & European Economist at IHS Global Insight said. "Of course if the U.S. defaults on its debt, we could be in a whole different ball game given the likely global economic and financial market turmoil this would cause."
The focus will now shift to the minutes of the Monetary Policy Committee released in two weeks' time for an indication on any divisions over the bank's "forward guidance".
Under governor Mark Carney's leadership, the bank has said it will not consider raising interest rates from their current 0.5 percent until the jobless rate falls to 7 percent.
Disappointing industrial output data released on Wednesday showing a fall in August were an anomaly in a slew of otherwise positive data for the U.K. in recent months. The most recent figures show U.K. unemployment still stood at 7.7 percent between May and July.
Critics of the bank's forward guidance policy include Andrew Sentance, a former member of the bank's Monetary Policy Committee, who argues that a delay to hiking rates will mean a bigger hike further down the track. That could hurt the economy, he told CNBC.
"I've been calling for a gradual increase in interest rates for some time. When the euro crisis was at its peak obviously wasn't the time to start that but now we're seeing these improving economic indicators," Sentance told CNBC Europe's "Squawk Box".
Others argue that the recovery we are seeing is not yet self-sustaining and see good reason to vote against rate hikes.
Neil Williams, chief economist at Hermes dubbed the recent upbeat data as a"sugar rush" recovery based on primarily on an improved housing market. The IMF also warned on Wednesday that the U.K. recovery should not be taken for granted.
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