Bank of England policymakers decided to hold off another round of quantitative easing as the U.K. economy dodged recession and recent data showed recovery signs building up again even in the face of stringent spending cuts.
The nine-member Monetary Policy Committee decided to retain its key interest rate at record low 0.50 percent and the size of quantitative easing at GBP 375 billion.
The U.K. interest rate has been at the current record low level since March 2009, with the central bank having so far printed altogether GBP 375 billion at varying quantities to shield the economy from downturn.
Policymakers examined the latest quarterly inflation and GDP projections from the Inflation Report before taking the decision, which would be available to public on May 15.
This month, members likely assessed that more stimulus is not required at this juncture after the extension of the Funding for Lending Scheme for one year. The minutes of the meeting to be published on May 22 will reveal the latest voting pattern. Today's decision is also likely to be the result of a split vote.
The government and the central bank also altered the FLS scheme on April 24, offering more incentive for banks to boost lending to households and businesses.
Although pressure on stimulus in the near term has eased, the economy is still far from buoyant and with fiscal policy tight and global growth muted and stuttering, there remains a strong case for further support from monetary policy, IHS Global Insight's Chief UK economist Howard Archer said.
Economists expect the central bank to resume stimulus measures once Mark Carney takes over as BoE Governor in July. He is expected to initiate reforms on the interest rate path.
Outgoing Governor Mervyn King along with Paul Fisher and David Miles voted for additional stimulus over the last three months but a majority of six members defeated their call, citing risks to inflation and pound.
In the first quarter, the U.K. economy averted a triple-dip recession, largely due to an expansion in the dominant service sector. The economy expanded 0.3 percent in the first quarter, offsetting the 0.3 percent contraction in the previous three months.
The recent Purchasing Managers' data for April added to signs of improvement in private sector activity. The service sector expanded at the fastest pace in eight months on strong growth in new order wins. At the same time, declines in manufacturing and construction activity slowed from the prior month.
Moreover, today's official data showed industrial production rising more than expected in March as unusually cold weather pushed up demand for electricity and gas. Output was up 0.7 percent from the prior month.
On the negative side, U.K. inflation continues to hover stubbornly above the 2 percent target, squeezing consumers' purchasing power. The rate was steady at 2.8 percent in March.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.