The British economy will not get additional bailout cash this month. The Bank of England rejected any additional monetary stimulus for the country’s struggling economy, as authorities strove to stave off any whiff of inflation.
Thursday's announcement from the Bank's Monetary Policy Committee says the stimulus program of asset purchases remains at a total of 325 billion pounds, or $524 billion, which accounts for 20% of the country’s GDP. The British central banking body also decided to keep its base interest rate at the all-time low of 0.5%.The decisions, however, didn’t come as a surprise to most analysts, who believed that concern over persistently above-target consumer price inflation – currently at 3.5 % – would outweigh worries about economic growth. The UK economy has officially been in recession for two quarters, its GDP shrinking during that period. In the first 3 months of 2012, the economy contracted 0.2%.The major concern of policymakers, most prominently of Bank of England deputy governor Paul Tucker, is that the price rise will not remain within the bank’s target of 2%. March’s price rise – the first in half a year – to the current 3.5% marked the highest price growth among the Group of Seven major advanced economies.Mervyn King, Bank of England Governor, told Reuters that the economy should be recovering slowly and steadily later this year, while inflation remains too high.Quantitative easing (QE) is losing popularity around the world. In the US the initiative seems to be off the agenda until after the presidential election in early November. Currently there is a lack of QE advocates among the members of the Federal Open Market Committee, with Ben Bernanke, the Fed chairman, also appearing no longer to support it.The European Central Bank has ceased its Long-Term Refinancing Operations, as well as interest rate cuts. Again, inflationary pressure became a major fear, as eurozone figures are running above the ECB plan. The target annual inflation rate of the European Central Bank is "below but close to 2%,” while in March the figure reached 2.7%.