MercoPress. South Atlantic News Agency

Bank of England adopts “wait and see” stand on money injection

Data from the UK economy remains contradictory

Bank of England Monetary Policy Committee adopted a “wait and see” stand as they held off from delivering more aid to the recession-blighted UK economy. The Bank had been expected to expand its quantitative easing (QE) programme - effectively printing money - by £25 billion to £150 billion, but took no further action after its two-day meeting.

The Monetary Policy Committee (MPC), which also held interest rates at their record low of 0.5% for the fourth month in a row, said it would review the policy in August. The decision comes despite concerns over the fragility of recent signs of stabilisation in the economy following a steep decline.

Although recent survey data has been more positive, manufacturing output showed a surprise fall in May, and official figures showed a far worse than expected 2.4% slump in overall GDP in the first three months of 2009 - the biggest quarterly fall in more than 50 years

Also, UK unemployment rose to 2.261 million in the three months to April. This was the highest level since November 1996. There has also been some stabilisation in the housing market, and while prices fell in June from May, according to the Halifax, the annual rate of decline eased from 16.3% to 15%.

The pound gained 1% against the dollar - climbing above 1.62 US dollars following the decision - as markets took the lack of action from the Bank as a sign it was more optimistic about prospects.

But according to the Bank's own data, credit conditions remain tight and lending to business fell in April and May -suggesting efforts to boost the money supply were having little immediate impact.

Experts suggested the MPC's decision to hold off was simply a delay to give it more time to assess the strategy with updated inflation forecasts next month.

IHS Global Insight's Howard Archer, who expects rates to be on hold at 0.5% well into 2010, said: “We doubt the Bank of England is bringing an end to the program.

”Despite the recent improved data overall, serious economic and financial obstacles remain to any near-term return to sustainable growth. Indeed, the danger of relapses was highlighted by the disappointing renewed contraction in industrial production in May.”

Earlier this week, the British Chambers of Commerce (BCC) business group said that the worst of the UK's recession was over, but added that talk of a recovery was premature.