Bank of England Holds Rate; Asset Purchases Unchanged

The Bank of England voted on Thursday to stick to its four-month program to pump an extra 75 billion pounds of quantitative easing into Britain's rapidly slowing economy.

Getty Images Governor of the Bank of England Mervyn King

The BoE's Monetary Policy Committee also kept interest rates at a record low 0.5 percent — where they have been since March 2009 — as it eyes the outcome of a critical European Union summit aimed at tackling the euro zone debt crisis.

The European Central Bank, which announces the results of its own policy meeting at 1245 GMT, is widely expected to lower rates ahead of the EU summit.

Economists polled by Reuters last week were unanimous that the BoE would keep its target for quantitative easing asset purchases at 275 billion pounds, which it raised it to in October, and leave interest rates unchanged.

BoE policymakers have been clear over the past month that they see little merit in fine-tuning the level of existing gilt purchases, and that the 75 billion pounds the bank is purchasing from October to February is close to the maximum the market can easily supply.

However, most economists expect a further 75 billion pound extension to the QE program in February.

The BoE and Britain's independent government forecaster have both slashed their growth forecasts over the past month, and the OECD think tank believes Britain's economy has already entered a mild recession.

British inflation remains close to a three-year high at 5 percent, but the BoE forecasts it will tumble next year to below its 2 percent target because of economic weakness and fading one-off effects that have pushed up prices over the past year.