The Bank of England has displayed a defiant stance over its monetary policy, as no alterations were announced in a statement on Thursday.
The announcement comes after rumours that the bank was set to reverse its initial policy over interest rates and implement an increase.
However, the bank has reiterated its intention to keep interest rates low for a considerable period of time in order to aid the country to continue to recover economically.
Output in the UK continues to struggle to reach the levels it experienced prior to the recession which compares particularly unfavourably to the output being enjoyed by many other large economies. The statistic has been used as a clear representation that the UK economy still requires a great deal of work on before it truly recovers.
The Bank of England previously identified its commitment to the UK’s economic recovery by pledging to stop interest rates increasing until that point that the unemployment rate dropped below 7%. It is currently estimated that the feat will take about 3 years to achieve providing that inflation is kept at a normal level.
They have now moved to reiterate this intention by highlighting their continued resolve to hold interest rates at 0.5%. They have also stated that they will not make a change in their total asset purchases which is set to stay at around £375 billion.
The UK is currently enjoying a period of economic growth with the International Monetary Fund announcing that growth is to continue into 2014. According to the IMF, growth will rise by 0.5% next year to 1.9%, signalling positive times for the UK economy.
“Even on an optimistic basis the UK labour market is not going to deliver an unemployment rate at 7 percent for six to twelve months at the very earliest, while inflationary pressures are under control,” he said.
Consumer price inflation currently stands at 2.7 percent, and has exceeded the BoE’s 2 percent target since late 2009.
There are also some clouds on the horizon for Britain’s recovery.
An unexpected fall in Augusts industrial output has raised questions about whether the economy is expanding as rapidly as private-sector surveys have suggested, while there is also a risk that the U.S. government shutdown escalates into a default on government debt.
But more economic stimulus in Britain in the form of asset purchases looks unlikely for now, as the two policymakers who backed it earlier this year – Paul Fisher and David Miles – have said they would prefer to keep it in reserve in case the economy weaken.