Bank leaves things as they are - for now at least

The Bank of England has decided not to follow its American counterpart with another round of emergency measures to prop up the economic recovery.

Policymakers held interest rates at their historic low of 0.5 per cent and resisted pressure to pump more cash into the economy, despite fears surrounding the massive government spending cuts announced last month.

Although there is likely to have been another three-way split among members of the nine-strong monetary policy committee (MPC), economists suspect the recent better-than-expected economic data had steadied the hands of those in the no-change camp.

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The US Federal Reserve unveiled a second quantitative easing programme of $600 billion (373bn) earlier this week in a bid to kick-start the lagging American recovery.

City expectations that the MPC would follow suit yesterday cooled after higher-than-expected third-quarter GDP growth of 0.8 per cent, as well as upbeat data from the manufacturing and services sectors.

The good mood was bolstered yesterday as the FTSE 100 Index hit a two-year high on the back of dollar weakness and the Halifax reported a moderate rebound in house prices following a sharp fall in September.

Analysts suspect the Bank will reveal more quantitative easing (QE) early next year - possibly injecting a further 50bn on top of the existing 200bn - as the country starts to feels the pain of austerity measures.

Philip Shaw, chief economist at broker Investec, said: "While we would not totally disregard the possibility of further QE at some point, the MPC will still be nervous about high prevailing rates of inflation and the possibility these become entrenched over the longer term. Recent brighter news on the economy would probably have to swing sharply into reverse to prompt the committee to restart QE."