Breaking News, World News and Taiwan News.

Updated Thursday, March 10, 2011 9:10 pm TWN, By Roland Jackson, AFP

Sponsors
▪	Buy china wholesale products from reliable chinese wholesalers on DHgate.com!
▪	Save 75% for all hotels in Shanghai, Beijing and whole China. Lowest rates for Flights in China.
▪	Get the best deals for Guangzhou Hotels or choose from more than 10,000 hotels in 499 Chinese cities.
▪	Find great real time deals on China Flights. Book flights to China or China domestic flights 24/7.

Bank of England likely to freeze interest rates: analysts

LONDON--The Bank of England (BOE) is Thursday set to vote against raising its key interest rate from a record-low 0.50 percent, as it balances fragile economic recovery against soaring inflation, analysts said.

The British central bank's nine-strong monetary policy committee (MPC) will announce its latest decision after a two-day meeting.

“The MPC seems to be getting closer to raising interest rates soon. However, most members still want to wait for a clearer picture regarding the underlying pace of recovery,” said Capital Economics analyst Vicky Redwood.

“And the latest data have done little to clarify things. So a rate rise this month — while certainly a possibility — does not look that likely.”

The BOE has kept borrowing costs at a record low 0.5 percent since March 2009, as it seeks to aid recovery from a record-length recession.

However, the bank's rate-setting panel MPC has slowly moved towards raising interest rates this year amid mounting concerns over high inflation.

Policymakers Andrew Sentance and Martin Weale called for an interest rate hike in January. They were joined by an additional hawk, Spencer Dale, in February.

Recent official data shows that annual inflation surged to a two-year peak at 4.0 percent in January, after 3.7 percent in December, on the back of surging oil prices and food bills. The Bank of England's main task is to use interest rates as a tool to keep inflation close to 2.0 percent.

The British economy meanwhile shrank by more than expected in the final three months of last year, according to revised official data, as harsh wintry weather hampered prospects of a swift recovery.

Gross domestic product (GDP) — the total value of goods and services produced in the economy — contracted 0.6 percent in the three months to December.

The reading, revised down from an earlier estimate of a 0.5-percent contraction, and marks the largest GDP drop since the second quarter of 2009.

Economist Hetal Mehta, at Daiwa Capital Markets Europe, said the BOE would likely wait for a clear picture to emerge of first-quarter economic activity, before plotting the path ahead.

“I am not expecting any change in policy at this week's MPC meeting,” Mehta told AFP.

“I do not think there has been sufficient new data in the past couple of weeks ... to sway the necessary additional two members to vote for a rate hike at this stage.

“I think at the very earliest the MPC will wait until May, when they will have the preliminary first-quarter (GDP) data, and that only if growth in the first quarter is above 0.6-0.7 percent, will they hike at that point.”

This week's interest rate announcement will be the last before British finance minister George Osborne delivers his annual budget on March 23.

Osborne said Monday that Goldman Sachs' long-serving senior European economist, Ben Broadbent, will join the Bank of England's interest-rate setting panel in June, replacing Sentance.

Subscribe to The China Post and save 25%. Click here