Bank Of England Mulls Another Round Of Fiscal Stimulus Action

London, England, United Kingdom (AHN) – The Bank of England is considering another round of fiscal stimulus after the pound dipped and interest rates suffered its largest drop in over 18 months on Wednesday.

Reports said the British central bank may order another round of quantitative easing – or the printing of electronic money. The move would boost money supply and improve the pound’s standing against other currencies.

Some of the nine-members of the Monetary Policy Committee of the Bank of England pushed for more stimulus action because of threats to the recovery of the British economy. The committee, in a 8-1 vote, opted to keep key lending rate at the record-low level of 0.5 percent and not to increase the bank’s $300 billion (200 billion pounds) quantitative easing program for the meantime.

On Wednesday, the business group CBI forecast that the Bank of England would hike benchmark interest rates later than previously anticipated. CBI foresaw key lending rates going up to 1.25 percent by the end of 2011.

CBI said Britain’s tentative recovery will be sustained, but with weaker levels of growth because of massive spending cuts by the coalition government.

Among CBI’s other major predictions are that inflation would remain above the Bank of England’s 2 percent target until 2011, exports would rise by 3.5 percent in 2010 and 6.4 percent in 2011 and unemployment would even grow to 2.62 million jobless Britons by end of next year.

View full post on All Stories