London: The Bank of England on Monday kept its key interest rate at a record low 0.50 percent in the first monetary policy decision since the Conservatives won Britain`s general election.
The meeting was held on Thursday and Friday but the outcome by the independent BoE was delayed due to last week`s vote that was won by Prime Minister David Cameron`s Conservative party.
Borrowing costs are now likely to stay on hold for the rest of the year, economists said, owing to slowing economic growth and the prospect of more austerity from Cameron, who clinched an unexpected victory in the May 7 vote.
"The BoE`s Monetary Policy Committee (MPC)... voted to maintain Bank Rate at 0.50 percent," the British central bank said in a brief statement.
The nine-member panel also agreed to maintain its quantitative easing economic stimulus at £375 billion ($580 billion, 520 billion euros).
Economists said the MPC had chosen to continue its wait-and-see policy, particularly in light of an economic slowdown in the first quarter of 2015.
Gross domestic product (GDP) expanded 0.3 percent between January and March. That dashed expectations of 0.5-percent growth, after 0.6 percent in the final quarter of 2014. The election was also an endorsement of Cameron`s austerity policies and will likely see a continuation of cuts to public spending as he seeks to reduce a budget deficit of nearly £90 billion.
"Since the first estimate of Q1 GDP has cast some doubt over the recovery`s health, the MPC is likely to have voted unanimously again at this month`s meeting to keep interest rates on hold," said Samuel Tombs, analyst at Capital Economics research group.
"And while we think that the recovery is secure, the tough fiscal squeeze that is now all but certain to hit the economy and the subdued outlook for inflation should ensure that monetary policy is tightened only gradually from next year."
At the same time, Britain is battling the risk of deflation, due partly to the recent sharp slump in world oil prices.
The 12-month Consumer Price Index (CPI) inflation rate languished at zero in February and March -- rather than turning negative as some expected -- meaning that Britain has avoided deflation for now.
The bank`s main task is to keep inflation close to a target of 2.0 percent.
"The BoE will ... likely retain the view that while deflation remains possible in the near term, consumer price inflation will start trending up from the third quarter," noted IHG Global Insight economist Howard Archer.
Minutes from the MPC gathering will be published in May 20, when markets will gain greater insight into policymakers` thinking.Cameron swept back to power last week after an unexpected election victory handed his Conservative party a narrow majority in parliament for the first time in almost two decades.
The Conservatives capitalised on their stewardship of the economy, which has staged a solid recovery since 2010 despite the first-quarter slowdown.
However, the Liberal Democrats were ravaged at the ballot box, hurt by the compromises they had to make in five years as junior coalition partners in Cameron`s administration.
The result has been well received by the markets, as investors welcomed the stability and pro-business policies of the Conservatives.
The BoE`s key rate has stood at 0.50 percent since March 2009, when it also embarked upon its radical QE stimulus to encourage lending in the broader economy and boost recovery.
