Wednesday, the minutes of the Monetary Policy Committee meeting of the Bank of England held on April 8 and 9 showed that policymakers voted unanimously to hold the Bank Rate at a historical low of 0.5%.
The minutes also revealed that all the nine members of the MPC stood united while deciding to continue with the initial asset purchase plan worth GBP 75 billion.
The central bank said the Committee had agreed to review the scale and timing of the asset purchase programme each month. In principle, if the evidence warranted it, the
Committee could decide either to increase or reduce the programme of purchases, the minutes showed.
Though a high degree of uncertainty prevailed over the appropriate scale of asset purchases required to keep inflation at target in the medium term, members agreed that there had been no material change in the conditions that had led them to the decision last month on the necessary scale and timing of asset purchases that was needed.
The bulk of the purchases had been of gilts, with smaller volumes of purchases in commercial papers and corporate bonds. Members assessed that the initial effects of the programme had been encouraging. The minutes said it was difficult to know if the falls in the yields would persist once the GBP 75 billion programme of purchases was complete.
Despite the pickup in February, inflation would possibly fall below the target by the second half of this year, reflecting diminishing contributions from retail energy and food prices and rising spare capacity, the BoE reported.
Yesterday, Andrew Sentance, an MPC member said the economy might emerge out of recession during the course of the year and into 2010. He added that, at present, the key challenge is to support demand and help lift the economy out of recession and head off the deflationary risks associated with it.
The Confederation of British Industry forecast a slow and fragile recovery in the UK with growth resuming only in the spring of 2010. The CBI revised down its GDP forecast for 2009 to a 3.9% contraction compared to an earlier estimate of a 3.3% GDP decline, reflecting a harsher sequential decline of 1.8% in the first quarter of 2009.
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