UPDATE 1-BoE keeps rates at 0.5 pct, makes no change to QE

* BoE keeps rates at 0.5 pct, leaves QE total at 200 bln stg

* Decision widely expected as economy steady in past month

* BoE must assess spending cuts, euro zone turmoil in 2011

(Adds details, background)

By David Milliken

LONDON, Dec 9 (BestGrowthStock) – The Bank of England voted to make
no change to its monetary policy this month, in a widely
expected decision as it waits to see how much growth next year
suffers from UK public spending cuts and euro zone turmoil.

None of the more than 60 economists polled by Reuters last
week expected the BoE’s Monetary Policy Committee to change the
0.5 percent interest rate and 200 billion pounds ($317 billion)
of quantitative easing that have been in place since February.

Financial markets did not move after the decision.

“The economic news over the past month has been consistent
with policy on hold,” said George Buckley, chief UK economist at
Deutsche Bank.

Despite a debt bailout for neighbouring Ireland, the
economic outlook for Britain has changed little since November’s
MPC meeting and consumer price inflation has risen further above
its 2 percent target to 3.2 percent.

Manufacturing activity has been strong following robust
overall economic growth of 0.8 percent in the third quarter,
though trade data on Thursday was unexpectedly weak, casting
doubt on the BoE’s hopes of an export-led recovery next year.

The central bank will not publish details of the MPC’s vote
or discussion until Dec. 22, but most economists expect a repeat
of last month’s three-way policy split.

MPC member Andrew Sentance said since November’s meeting
that he still saw a need to raise interest rates, while his
dovish counterpart Adam Posen reiterated his call for an extra
50 billion pounds of asset-buying with new money.

“If anything the recent data flow has tended to favour
Sentance’s position with the economy experiencing the strongest
six-month period of GDP growth for 10 years,” said James
Knightley, UK economist at ING.

“However, the ongoing threat from fiscal austerity, tight
credit conditions, falling house prices and the euro zone
sovereign debt woes will continue to provide downside risks,” he

Most economists do not expect rates to rise until late 2011,
and only see more printing of new money if looming government
spending cuts cause a bigger-than-expected economic slowdown
next year.

The BoE forecast last month that it would take until early
2012 for inflation to return to target, in part because
value-added tax on most goods and services will rise by 2.5
percentage points in January.

This tax rise is part of a four-year plan of fiscal
tightening to tackle Britain’s swollen post-financial crisis
budget deficit, which will involve the deepest public spending
cuts in decades.

The government and BoE predict that overseas demand will be
able to take the place of domestic consumption, but even deeper
fiscal retrenchment in major British export markets such as
Ireland will make this a challenge.
(Additional reporting by Fiona Shaikh and Kate Holton, editing
by Ron Askew)

UPDATE 1-BoE keeps rates at 0.5 pct, makes no change to QE