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BoE leaves rates, asset purchase target unchanged

Thursday, 7 Nov 2013 | 2:50 AM ET
The Bank of England
Alice Tidey | CNBC
The Bank of England

The Bank of England (BoE) left interest rates at a record low of 0.5 percent and its asset purchase target unchanged at £375 billion as expected on Thursday.

Yields on benchmark 10-year U.K gilts were relatively unchanged, holding steady at 2.708 percent. Sterling also showed little movement against the dollar, ticking slightly lower to $1.606 after starting Thursday's session at $1.608.

BoE keep rates unchanged at 0.50%
Duncan Weldon, senior economist at the Trade Union Congress, and Andrew Sentance, former MPC external member and senior economic adviser at PwC, discuss the Bank of England's interest rate decision.

The focus will now shift to the inflation report due on Wednesday 13 November with Governor Mark Carney likely to give an update on growth forecasts and any updates on policy.

(Read More: Bank of England:2014 rate rise very unlikely)

Markets hadn't expected any change in policy from the central bank on Thursday with its "forward guidance" stipulation effectively detailing how it intends to proceed with the fragile U.K. recovery for the next few years.

(Read More: Mark Carneypushes ahead with Bank of England review)

Under the new governor'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, which the bank does not expect to happen before the end of 2016.

Former BoE MPC member discusses rate hike prospect
Andrew Sentance, former MPC external member and senior economic adviser at PwC, discusses the "knockouts" for a rate hike and whether unemployment is a good indicator for when to increase interest rates.

Market watchers however, have been left bemused as to how the BoE can stick to its interest rate plan when data continue to surprise on the upside. Some wonder if Carney "jumped the gun" and will have to alter promises with the improving U.K. economy.

(Read more: Mark Carney: the'George Clooney' of banking?)

The latest data for the U.K. this week has continued to dazzle onlookers. Activity in Britain's services sector increased at the fastest rate since May 1997 last month, a closely watched survey showed on Tuesday.

James Knightley, U.K. economist at ING Wholesale Banking, told CNBC on Tuesday that U.K. employment and investment spending will pick up as services grow strongly and that growth will be stronger than in most developed countries.

By CNBC.com's Matt Clinch.Follow him on Twitter @mattclinch81

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