Bank of England keeps benchmark rate at 0.5%

The Bank of England (BoE) kept the benchmark rate unchanged at record low 0.5 percent and held the quantitative easing policy at 375 billion pounds (572 billion U.S. dollars) at its Monetary Policy Committee (MPC) meeting Thursday. It was the first gathering since Mark Carney took his position as governor of the British central bank. Carney, a 48-year-old Canadian, replaced Mervyn King on July 1, becoming the first foreign governor of the 319-year-old central bank. In Britain, there have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time, said the BoE in a press release. "Twelve-month CPI inflation rose to 2.7 percent in May and is set to rise further in the near term. Further out, inflation should fall back towards the 2-percent target as external price pressures fade and a revival in productivity growth curbs domestic cost pressures," said the BoE. The nine-member committee also noted that the recent significant upward movement in market interest rates would, however, weigh on its output and inflation outlook. "In the Committee's view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy," said the BoE. Meanwhile, the BoE mentioned that the case for adopting some form of forward guidance, including the possible use of intermediate thresholds, would have an important bearing on the Committee's policy discussions in August, implying policy framework reform then. Stephen Boyle, Head of RBS Group Economics, said, "With stronger economic data in recent weeks, it was unlikely that there would be a policy change in Mark Carney's first MPC meeting as the new governor." "But the minutes will be read like tea leaves for signs of a change in approach by the MPC. A move towards providing forward guidance is likely to be the first policy evolution in the Carney era," added Boyle.