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2010.07.0808:13:00UTC+00BoE Retains Key Rate, GBP 200 Bln Bond Purchase

The Bank of England on Thursday left its key interest rate unchanged at a historic low and maintained the size of asset purchase scheme at GBP 200 billion as expected.

At the end of two-day rate setting meeting, policy makers led by Governor Mervyn King, decided to hold the official Bank Rate paid on commercial bank reserves at 0.5%. The current rate is the lowest since the central bank was established in 1694.

The Monetary Policy Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at GBP 200 billion. The central bank will release the minutes of the meeting on July 21.

"It is likely that Andrew Sentance again voted for a rate hike given his recent comments, but we doubt any other members will have joined him given ongoing concerns about the economic impact from fiscal consolidation and external weakness," said ING Bank NV's James Knightley.

The interest rate is set to start rising in February 2011, but this looks questionable with the economy already set to be hit by Value Added Tax rising to 20% next January, commented Howard Archer, an economist at IHS Global Insight. The first rate hike may well be delayed until the second quarter, the economist added.

Copyright(c) 2010 News.com, Inc. All Rights Reserved

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