Thursday, December 22, 2011

UK rate setters unanimous in maintaining policy (AP)

LONDON ? The Bank of England's rate-setting body unanimously decided to keep policy unchanged at its most recent meeting as it continued to assess the fallout from Europe's raging debt crisis.

Minutes of the meeting of the Monetary Policy Committee published Wednesday, showed that all nine members voted to keep the benchmark interest rate at the all-time low of 0.5 percent and to maintain the monetary stimulus at 275 billion pounds ($433 billion).

The rate-setters, who are tasked with keeping inflation around the 2 percent level, said they expected price pressures to ease quite dramatically next year from 5 percent in October, largely because the factors that drove prices higher in 2011, including higher sales taxes and energy prices, drop out of the annual comparison. They also said high unemployment would keep a lid on domestically generated inflation by weighing on wage demands.

The minutes show that rate-setters are continuing to worry about the debt crisis in Europe, and some argued that more asset purchases "may be warranted in due course."

Fears were raised that the worst risks in the eurozone "had not so far crystallized" and that the possibility remained that banks would find it difficult to secure funding alongside volatile financial markets.

Separately, the Office for National Statistics, revealed that the U.K.'s public sector net borrowing excluding financial interventions ? a broad gauge of the state of the country's public finances ? fell to 18.1 billion pounds ($28.5billion) in November, down from 20.4 billion pounds a year earlier.

The fall was largely driven by higher tax receipts from the new levy on banks and an increase in the sales tax to 20 percent.

Analysts said the British government is on track to hit its full year borrowing targets of 127 billion pounds.

But there are fears that the government's deficit reduction plans could yet be derailed amid rising unemployment and predictions that the U.K.'s economy is on the brink of another recession.

While Moody's confirmed the U.K.'s triple A credit rating on Tuesday, it warned that the country is exposed to both domestic weakness and the financial crisis in the eurozone.

Source: http://us.rd.yahoo.com/dailynews/rss/britain/*http%3A//news.yahoo.com/s/ap/20111221/ap_on_bi_ge/eu_britain_economy

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