For the fourth month in a row, Bank of England interest rates will remain at the record low of 0.5%. In an announcement today, the UK's central bank said it would not expand its quantitative easing of financial markets, much to the surprise of the market. The bank has been buying up assets aggressively, printing cash to finance what is likely to be £125 billion in purchases by the end of this month.
Financial markets expected a much different play, involving an increase in this asset purchase target by another £25 billion (to £150 billion). This move would have let the Bank of England shove even more money into the economy through next month, which is when the bank publishes its latest quarterly economic forecast.
The decision comes as Britain's economy has found something of a resting place. The freefall seems to be over, but the sense of calm is tenuous. Lending by banks is still fairly weak and unemployment is still climbing, making any hope of recovery far from a sure thing.
What's the impact of this move? Well, there are two perspectives. One, involving the macroeconomic implications, is that keeping the asset purchase target at £125 billion won't make much of a difference. The other, emotional, is that this is a sign that the Bank of England is pulling back from its "easing" strategy. In August, the data will come out and someone's suspicions will be confirmed.
Why is gold marching higher? Ask the central bankers
Newspaper ad revenue of 28%, 8 quarters of double-digit drops
Closing Bell: Earnings working against stocks (BCRX, DELL, DHI, INTC, LEAP, PCS)
