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Bank of England will not provide more stimulus

The rate-setting committee of the Bank of England has kept the interest rates at 0.5% and rejected the proposals to inject more stimulus into the stumbling economy.
The decision indicates that the Monetary Policy Committee (MPC) has kept rates at historic lows for a period of four years.

Leadership-skillsThere have been calls for the Bank to provide more stimulus in order to support the economy by expanding the quantitative easing or QE programme. Sir Mervyn King, BoE’s governor, voted to increase the QE programme at the last meeting of MPC. He was outvoted when he along with three MPC members backed a £25bn increase in QE to £400bn.

'Live issue'

The nine-member committee was divided in the latest vote as per analyst sources.

Stephen Gifford who is the director of economics at the CBI, a business lobby group, stated that due to a combination of economic data received and MPC’s tendency to move to a dovish direction such a decision was made. As there is a modest pickup rate expected the furthering of QE programme will remain a live issue.

Pound Sterling v US Dollar

Last Updated at 07 Mar 2013, 18:36 GMT *Chart indicates local time. The pound has risen sharply in response to the bank's announcement, while earlier it fell below $1.50 as speculations were ripe about more QE being announced.

After the MPC's decision was announced the pound value jumped to $1.506. The British Chambers of Commerce said that it expected to see an expansion being made of the quantitative easing programme but not so recently.

The programme involves pumping new cash into the economy through purchase of government bonds in order to instill confidence among investors.

Some economists from cpg finance however point out that, in the absence of continued stimulus, the UK economy will continue to grow at a sluggish pace as at present.