BOE Seen Keeping Bond-Buying Program on Hold as Lending Assessed

The Bank of England will maintain the size of its bond-buying program next week as policy makers assess the impact on the economy of its new 61 billion-pound ($99 billion) credit-boosting program, economists said.

The nine-member Monetary Policy Committee led by Governor Mervyn King will keep its target for bond purchases at 375 billion pounds, said all 40 economists in a Bloomberg News survey. It will also hold its benchmark interest rate at a record-low 0.5 percent, a separate poll showed.

Data this week showed the economy shrank less than previously thought in the three months through June and a report today showed services rebounded in July, signalling the U.K. may have exited recession in the third quarter. Some MPC members have said they want to gauge the results of the Funding for Lending Scheme, which started on Aug. 1, before deciding on the need for further stimulus.

“At this juncture, the committee is effectively in ‘on hold’ mode, albeit with a bias towards easing, and a move next week is probably off the cards,” said Philip Shaw, an economist at Investec Securities in London. While Investec forecasts policy makers will expand their bond program by 50 billion pounds in November, “there are a number of arguments to suggest that there is a degree of uncertainty” about this, Shaw said.

The MPC voted 9-0 to keep the target of its so-called quantitative-easing plan on hold on Sept. 6 as the central bank buys 50 billion pounds of gilts in a program due to run until November. Still, some officials said they “felt that additional stimulus was more likely than not to be needed in due course,” according to minutes of the monthly meeting published last week.

The Bank of England will announce the outcome of its policy gathering at noon on Oct. 4. The European Central Bank, which this month released details of an unlimited bond-purchase program to help tame the region’s debt crisis, will announce its policy decision 45 minutes later.

All 50 economists surveyed forecast the Bank of England will keep its benchmark rate unchanged.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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