Bank of England leaves policy unchanged

05/09/2013

LONDON, May 9 (Reuters) - Britain's central bank left rates on hold and did not extend its bond purchases on Thursday, opting to wait and see if recent initiatives to boost lending will lift the struggling economy.

Its decision to leave its key rate at 0.5 percent and the stock of bond purchases at 375 billion pounds ($584 billion) was widely expected by economists, who believe the central bank is shifting its focus away from bond purchases towards schemes to support the flow of credit.

The Bank of England announced a major expansion of its "Funding for Lending Scheme" last month to give bigger incentives for banks to lend to small businesses.

Many of the Bank's policymakers may also be keen to see what ideas Mark Carney has for kick-starting growth when he replaces Mervyn King as governor in July.

After months of dreary headlines, economic news has brightened over the past few weeks. Britain's economy grew a faster-than-expected 0.3 percent in the first three months of the year and surveys suggest the recovery gathered pace at the start of the second quarter.

Inflation in Britain is running at 2.8 percent, and has been above the central bank's 2 percent target for much of the past five years. However, the outlook has become less threatening thanks to a slide in commodity prices and a rise in the value of sterling over the past two months.

The central bank will publish updated growth and inflation forecasts next week which will give insight into its thinking.



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