Bank of England holds key rate at 0.50%

The Bank of England kept interest rates at a record-low 0.50 percent on Thursday and refrained from altering its stimulus policy, despite worries over the eurozone crisis and the weak global economy. The BoE said in a statement that its Monetary Policy Committee voted to hold rates at 0.50 percent -- where they have stood since March 2009 -- and maintain the level of its asset purchasing programme. The announcement, which followed a regular two-day monthly meeting, was in line with market expectations. Minutes will be published on June 20. Economists said the MPC would have given "serious" thought to expansion of its Quantitative Easing (QE) policy, under which it has so far injected £325 billion ($525 billion, 406 billion euros) of new money into the economy. Under QE, the bank creates new cash to purchase assets such as government and corporate bonds with the aim of boosting lending and economic output. "It seems likely that the minutes will show the MPC gave serious consideration to undertaking additional asset purchases, in light of the apparent deterioration in the global economic environment," said Barclays Capital economist Chris Crowe. "However, we think that the balance of views on the committee has not changed substantially, and we continue to view further easing as unlikely in the absence of material downside news to the growth outlook." The BoE decision echoed that of the European Central Bank, which held eurozone borrowing costs at a record low level of 1.0 percent on Wednesday. At the same time, however, China's central bank moved to shore up its powerhouse economy on Thursday by slashing its main interest rate for the first time since 2008 by 0.25 percentage points to 3.25 percent. "By refraining from QE at this stage it keeps the Bank of England's powder dry and gives it ammunition to act if the eurozone implodes later this month post the Greek election," said Forex.com research director Kathleen Brooks. "However, China stole the BOE's thunder by announcing a raft of measures to boost lending including a 25-basis-point interest rate cut." Recent data sparked questions about the health of the British economy, which faces headwinds from falling consumer spending, state austerity cuts and the chronic debt crisis in key trading partner the eurozone. The economy shrank 0.3 percent in the first quarter of this year, matching a 0.3-percent contraction in fourth quarter of 2011. That placed Britain firmly back in recession, as defined by two successive quarters of contraction. At the same time, the eurozone's dangerous sovereign debt crisis has sparked fresh fears of contagion across the 17-nation bloc and beyond. Britain is not a member of the eurozone. The International Monetary Fund had urged the BoE last month to cut interest rates further and pump out even more cash, in order to secure the recovery. Back in March 2009, the Bank of England slashed its main interest rate to 0.50 percent to help Britain out of its last recession. At the same time, it embarked upon its radical QE policy. Britain clawed its way out of a record-length recession in the third quarter of 2009, but recent first-quarter data showed it back in the doldrums.