Instant View - Bank of England makes no change to policy

LONDON (Reuters) - Following are reactions to the Bank of England's decision to make no changes at its second policy meeting under new governor Mark Carney which ended on Thursday, keeping interest rates at 0.5 percent and leaving its bond-buying programme on ice.

The BoE also made no announcement about an expected shift in strategy under which the central bank could start providing guidance on how long interest rates are likely to stay at their record low.

MELANIE BOWLER, MOODY'S ANALYTICS

"Bank-watchers are eagerly anticipating the introduction of forward guidance for monetary policy, but will have to wait another month before any new strategy is officially introduced.

"We expect the bank will move towards the use of date-specific forward guidance for monetary policy. That is to say, the bank is expected to explicitly tell markets how long it expects to hold rates at current levels.

"Such a new communication policy will help prevent premature monetary tightening which risks knocking the tentative recovery off track. The policy is aimed at preventing any unwarranted upcreep in borrowing costs. Gilt yields and the 3-month Libor interest rate have trended upwards in recent months, injecting some unwelcome monetary tightening into the U.K. economy."

HOWARD ARCHER, IHS GLOBAL INSIGHT

"The Bank of England was always unlikely to act at the August MPC meeting given next Wednesday's assessment on adopting a policy of forward guidance. Furthermore, the ongoing stream of improved news on the UK economy - evident again in the healthy manufacturing purchasing managers survey for July - suggests that the economy is not in need of any further stimulus for now at least.

"however, the improved news on the UK economy could be seen as highlighting the need for the Bank to make it absolutely clear that interest rates are not going to go up for some considerable time to come - so is supportive to the case for adopting forward guidance on monetary policy.

"We have little doubt that forward guidance on monetary policy is about to become a key policy lever for the Bank. While some MPC members have expressed concerns over forward guidance, the Bank governor Mark Carney is a strong advocate and he will highly likely be able to gain overall support from the committee for such a policy."

VICKY REDWOOD, CAPITAL ECONOMICS

"Today's Monetary Policy Committee (MPC) meeting was always looking likely to be a non-event ahead of the announcement about forward guidance due next week. Our best guess is that the MPC will commit to keep official interest rates low until an unemployment threshold is breached."

DAVID KERN, BCC

"The MPC made the right decision to hold interest rates and quantitative easing. Quarterly growth has been confirmed at 0.6% for the second quarter, the manufacturing PMI figure for July was strong, and there are signs that the eurozone economy is beginning to stabilise. This increases the likelihood that the UK economy will continue to grow at a moderate pace in the third quarter.

"Minutes from the recent MPC meeting suggest that QE is unlikely to be increased any time soon and low interest rates will be maintained for a long period, which will provide a stable environment for businesses.

"We continue to urge the MPC to consider new policy measures to help boost business lending. For example, the existing QE programme could be used to purchase private sector assets other than gilts, including securitized SME loans, as this would reduce the risk when banks are looking to lend to business."

Source: http://news.yahoo.com/instant-view-bank-england-makes-no-change-policy-111131175.html

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