Bank of England’s stimulus program to remain unchanged

bank of englandThe Bank of England voted last week to maintain the official rate paid on commercial bank reserves at 0.5 percent and to maintain the stock of asset purchases financed by reserves at $560 billion.

Global market interest rates have risen substantially since the May inflation report. Signs of a gradual recovery in the U.K. have emerged, though performance remains weak compared to historical standards.

Twelve-month CPI inflation rose to 2.7 percent in May and is expected to increase further. Inflation should fall more towards the two percent target as external price pressures dissipate and productivity growth reduces domestic cost pressures.

The central bank committee said incoming data over the past few months has been consistent with the outlook for output growth and inflation in the May report, but significant increases in interest rates could affect the outlook.

Since 2009, the Bank of England has injected $579 billion into the British economy. Under its stimulus program, the bank purchases bonds from financial institutions with newly created money with the hope that the extra funds will increase lending and boost economic growth, USA Today reports.

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