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British rates on hold

The Bank of England’s Monetary Policy Committee (MPC) has voted to hold interest rates at 0.5%. The last change was a half-point reduction on March 5.

In a release, the committee outlined problems still facing the British economy, including depressed consumer confidence, rising unemployment and a sharp drop in output in the fourth quarter of 2008.

Consumer price index (CPI) inflation declined to 3% in January, and the depreciation of the pound is continuing to add to importee cost pressures, the committee says. Inflation is likely to fall below the government’s 2% target by the second half of this year.

The MPC has also voted to continue with the £75 billion asset purchase scheme announced at its last meeting. It has spent £26 billion on the scheme since March and it will be another two months before it is completed.

The money will be used to buy private sector assets with the aim of improving the functioning of corporate credit markets. The Bank of England will also buy medium and long-maturity gilts, which will form most of its purchases by value over the next three months.

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