MercoPress. South Atlantic News Agency

Bank of England leaves rates and quantitative easing unchanged

Economist Blanchflower claims BoE was slow in reacting to the recession

The Bank of England held the United Kingdom’s base rate at 0.5% Thursday, marking the sixth consecutive month of record low rates. The Bank's Monetary Policy Committee also made no changes to its quantitative easing policy.

In a short statement the Committee said it had voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.It added: 'The Committee also voted to continue with its programme of asset purchases totalling £175 billion financed by the issuance of central bank reserves. 'The Committee expects the announced programme to take another two months to complete. The scale of the programme will be kept under review.'

The Bank has, like other central banks around the world, pumped billions of pounds into the economy in an effort to stimulate lending and demand. So far the Bank has announced plans to supply £175 billion to the UK economy using its Asset Purchase Scheme, after increasing the size of the programme last month in an unexpected move.

The subsequent minutes from the meeting last month rattled the market, after it emerged that members of the MPC - including governor Mervyn King - wanted to expand the facility even further, in order to support the recovery.

While recent data has prompted some market participants to speculate that we may see a return to positive growth this quarter, the majority of analysts expect rates to remain frozen at this level well into 2010 to ensure that any recovery is not stopped in its tracks.

In related news it was revealed that David Blanchflower threatened to quit his post at the Bank of England more than a year ago and accused governor Mervyn King of failing to respond fast enough to the recession.

In his column for The New Statesman, Blanchflower, who left the Monetary Policy Committee earlier this year, said the Bank was guilty of ‘group think’ and mocked the members of the rate setting committee who voted against more quantitative easing last month as ‘the feeble six’.

Blanchflower wrote in the column: “Clever as Mervyn King may be, he missed the crash and the subsequent recession, and hence, so did the consensual MPC on which I sat”.

“In August 2008, the MPC quarterly inflation report did not even contain the word ‘recession’; it saw the economy standing still over the next year. I very nearly quit the committee at that point. In an interview that month with Reuters, I called the forecast 'wishful thinking'. Mervyn called me into his office to admonish me for that one”.