In a scheduled announcement, the Bank of England has again kept its interest rate at 0.50%.
Even the most optimistic of forecasters do not see an increase in UK rates until the final quarter of this year. The Bank also kept their quantitative easing programme on hold, leaving the budget at £200 billion. In light of the latest figures, most recently better-than-expected manufacturing data released this morning, the question of a further extension to the budget seems to be fading. Following the upward revision to the UK's fourth quarter GDP figure and positive prospects for growth in this quarter, fear of the double-dip recession is receding. The Bank is still aware of the headwinds though, and is unlikely to dismiss the possibility of further monetary easing until conditions are more stable. Shortly, BoE Governor Mervyn King will give a statement on the progress of their monetary policies.
The pound is continuing to trade up this morning following the announcement, with direction in the short-term likely to come from developments on the campaign trail. Growing dissent in the business community over Labour's proposed National Insurance rise has solidified the Tories lead in the latest polls, with many leaders taking exception to Prime Minister Gordon Brown's assertion that they were being "deceived" by the Conservatives. However, the pound is unlikely to push too much higher despite continuing concern surrounding Greece's fiscal situation. Rhetoric from the Bank is still of a weak, protracted recovery and the growing possibility of a hung parliament will keep sterling on the back foot. The outlook for sterling against the US dollar remains on the downside and we are expecting further falls in the near term.
