Bank of England keeps money printing programme on hold

By SCOTT REID
Published on 08/03/2013 00:00

THE pound was given some respite yesterday after the Bank of England kept its money printing programme on hold.

Sterling had been under pressure ahead of the decision amid speculation the central bank would inject further stimulus into the flagging UK economy. It later rebounded from a 30-month low against the dollar to trade at $1.5037, up 0.2 per cent.

The vote to freeze the quantitative easing programme (QE) at £375 billion is likely to have been a close call. Last month, three policymakers – including governor Sir Mervyn King – voted to restart QE.

Glenn Uniacke, head of options at foreign exchange specialist Moneycorp, said markets had “breathed a sigh of relief” at yesterday’s outcome, which also helped push the FTSE 100 Index higher. “Had the QE taps been opened further, the pound could easily have pushed on to a three-year low against the dollar. The news that the money presses will be allowed to gather dust for another month will halt sterling’s slide for now, but conflicting data about the state of the economy mean the jury is still out on whether the UK has returned to growth in the first quarter.”

Howard Archer, chief UK economist at IHS Global Insight, said more QE could weaken the pound. “There is a danger that doing further QE at a time when sterling is already under serious downward pressure could cause the pound to fall too far too fast.”

The Bank kept interest rates on hold at 0.5 per cent.