09 May 2013 12:00 [Source: ICIS news]
LONDON (ICIS)--The Bank of England (BoE) on Thursday left its key interest rate unchanged at 0.5% and maintained quantitative easing (QE) levels at £375bn (€493bn, $586bn), following upbeat UK economic growth data.
On 25 April, official figures showed the UK had avoided a triple-dip recession after GDP grew by 0.3% in the first quarter.
Data on UK production from the Office of National statistics (ONS) released on Thursday suggest there will be no revision to this preliminary GDP growth estimate.
ONS data show UK manufacturing output in March was up 1.1% month on month, but down 1.4% year on year. Total industrial production in March was up 0.7% from February, but down 1.4% compared with March 2012.
On a quarterly basis, production output rose by 0.2% between the fourth quarter 2012 and the first quarter 2013, while manufacturing fell by 0.3% over the same period. Year on year, the UK’s first-quarter production fell 2.3%, while manufacturing was down by 2.1%.
David Kern, chief economist at the British Chambers of Commerce (BCC) said the ONS figures were slightly better than analysts predicted.
“While the monthly increases in both manufacturing and total production are welcome, longer-term comparisons are disappointing, and show year-on-year declines. These figures support our view that growth is likely to continue throughout the remainder of 2013,” he said.
“But the pace of recovery is still inadequate and further measures are needed to support growth,” Kern added.
On 3 May, Kern said the BoE’s Monetary Policy Committee (MPC) should resist pressures to boost QE levels. “In our view adding to QE would provide only marginal benefits for the UK economy, while increasing risks of higher inflation and the further weakening of sterling.
"UK inflation is already higher than in other major economies and we have to be very cautious of unintended consequences.”
The 2008–2009 recession forced the BoE into a series of interest rate cuts, with rates falling from 5.5% in October 2008 to the current record low, which was set in March 2009.
Last week, The European Central Bank (ECB) cut its key interest rate to 0.50% as it seeks to galvanise the foundering eurozone recovery.
The 0.25 percentage points cut represents the first movement of the ECB interest rate in 10 months, after inflation fell by 0.5% month-on-month to 1.2% in April, according to Eurostat, far below the ECB’s targeted inflation ceiling of 2%.
(€1 = £0.76, $1 = £0.64)
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