LONDON: The Bank of England (BoE) kept interest rates unchanged at 0.5 per cent after its first meeting of 2015, as dropping oil prices have pushed inflation to a 12 year low and last year’s rapid growth shows some signs of easing.
The central bank also said it would reinvest 4.35 billion pounds of proceeds from a maturing January 2015 bond in its 375 billion pounds ($565 billion) of quantitative easing asset purchases.
The BoE has previously committed to reinvest such funds until it has raised interest rates some way above their record low. Economists expected a move in rates this month, and most did not expect rates to rise until the third quarter of 2015.
Further falls in oil prices since then and more weakness in the euro zone, Britain’s biggest export market, now mean financial markets do not expect rates to go up for at least another year.
Shortly before the BoE rate decision, sterling hit its lowest level against the dollar in 18 months, suffering from the mix of broad dollar strength, weaker British growth prospects and uncertainty ahead of May’s national election that have seen it slump since the start of the year.
