MercoPress. South Atlantic News Agency

Bank of England keep rates and quantitative easing unchanged

Recession remains the main challenge.

The Bank of England Monetary Policy Committee voted Thursday to maintain the official rate unchanged at 0.5% for the third month in a row, but no fresh measures to stimulate the economy were announced.

However the Committee also voted to continue with its program of asset purchases totalling £125 billion financed by the issuance of central bank reserves. The program is expected to take another two months to complete.

Policymakers are trying to gauge how the economy is faring amid tentative signs of a recovery. A closely-watched survey on the service sector released earlier this week suggested that the recovery may be coming faster than expected.

But in its latest Inflation Report, the Bank of England warned that the economic outlook was still very uncertain.

Financial markets showed little reaction to the decision, with the pound edging slightly higher and the FTSE 100 index of the UK's top shares barely changed.

The European Central Bank also decided to keep interest rates unchanged at 1%.

Business groups have called on the BoE to increase its £125bn quantitative easing scheme, which aims to expand the amount of money circulating in the economy.

“The positive mood in the financial markets should not lull anyone into a false sense of security,” said David Kern, chief economist at the British Chambers of Commerce.

“Tackling the recession must remain the priority, especially with unemployment rising and firms continuing to slash investment,” he added.

The Bank is due to complete its £125bn spending on quantitative easing in July and the Treasury has said it can spend up to £150bn.

Under the programme, the Bank of England prints money and uses it to buy government and corporate bonds to increase money supply and stimulate the economy.