BoE To Keep Both Interest Rate And APF Steady In September

BoE will release interest rate for the month of September where expectations are in favor of keeping both borrowing cost and APF quantity unchanged.

The BoE has been keeping both interest rate at 0.50% and APF at 200 billion pounds recently despite the improvement witnessed recently.

In the second quarter, the revised gross domestic product rose to 1.2% from 0.3% in the first quarter, and on the annual basis the expansion inched up to 1.7% from the advanced reading of 1.6% and this refers to the strength and strong pace of growth in the second quarter.

The British Chamber of Commerce has raised its forecast for British economic growth during the current year, referring that the economic growth rate would reach 1.7% by the end of 2010.

However, the latest inflation report released by the BoE, growth forecasts for 2010 were cut to 3% compared the previously estimated 3.6% as a result of the expected slowdown in the pace of global economic growth in the second half of this year.

Andrew Sentence, a member of the Monetary Policy Committee, is still sticking to his position in terms of raising interest rates and start withdrawing stimulus plans from the market to address the risks of escalation in inflation.

Despite the continuing request for Sentance, the BoE will probably keep the interest rate low till at least the end of the year to boost recovery that is still fragile. King said previously that the bank needs more time to hike interest rates to pre-crisis levels

Although inflation started to ease reaching 3.1 percent during July from 17-month high of 3.7% recorded in April, yet it remains above the bank's 3% upper limit which may prompt the bank to keep the borrowing cost low.

In the euro zone, the ECB will release monthly bulletin which will mainly cover details announced by Trichet last week, where the ECB left interest rate unchanged at 1.00% and will continue loan offering into 2011. In addition, the bank raised both growth and inflation forecasts.

Last week, the ECB left interest rate unchanged at 1.00% and will probably keep the rate low amid the planned austerity measures to trim the huge sovereign debt.