The BoE’s decision contrasts with a move by the US Federal
Reserve on Wednesday to buy $600 billion of bonds with new money over the next
eight months, after what it called “disappointingly slow” progress toward its
economic targets.
Sterling hit a nine-month high against the dollar and gilts
extended losses to hit a session low down more than half a point on the day, as
some in the markets had seen an outside chance that the BoE might follow in the
Fed’s footsteps.
However, this had not been economists’ central view. The
rate decision had been anticipated by all 63 analysts in a Reuters poll. The
only analyst who had forecast more QE this month when polled last week revised
his call on Wednesday after firmer-than-expected services PMI data.
“With inflation remaining well above target and higher VAT
from January next year likely to keep it there through 2011, the BoE will be
looking for clear signs that the recovery is stalling before embarking on
additional QE,” said ING economist James Knightley.
Unexpectedly strong UK growth data for the third quarter and
surveys indicating that manufacturing and service sector activity is still
growing may have encouraged BoE policymakers to hold off injecting any further
monetary stimulus for now.
But there is a chance the UK central bank may eventually
decide that more stimulus is needed to shore up the economy against deep
government spending cuts, and a significant number of analysts reckon that
could come in February.
One Monetary Policy Committee member, Adam Posen, voted in
October for a £50 billion ($81 billion) expansion of the BoE’s 200 billion
pound asset purchase program and is likely to have done the same this month,
while Andrew Sentance will probably have reiterated his call for higher rates.
Minutes to the Nov. 3-4 meeting published on Nov. 17 will
reveal whether either man was able to win broader support on the MPC.