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BoE holds rates, QE

The Bank of England's monetary policy committee voted unanimously to keep the existing policy framework in place, maintaining its main interest rate and the size of its quantitative easing program.

Less than a day after the U.S. Federal Reserve raised its main interest rate for the first time in a year and the second time in a decade, the BoE said its bank rate would remain at 0.25% and that it would continue with a £60 billion program of government bond purchases slated to take its overall QE package to £435 billion. It will also continue buying up to £10 billion of sterling-denominated, investment-grade debt from nonfinancial companies.

The BoE noted a rise since November in long-term interest rates internationally, in part reflecting "expectations of looser fiscal policy in the United States" in the wake of Donald Trump's election as president, although it also said the global outlook had become "more fragile, with risks in China, the euro area and some emerging markets, and an increase in policy uncertainty." It also said it expected emerging markets to be generally better prepared to absorb the impact of rising U.S. interest rates than they were during the 2013 "taper tantrum," when suggestions that the Fed could scale back its own QE program prompted a flight out of emerging-market assets.

In addition, the committee said it continued to expect inflation in the U.K. to rise in 2017, although a 6% rise in the value of sterling since November would serve to mute the impact of a weaker pound on the cost of imports. It also continued to project a slowdown in economic growth in 2017, although the extent and timing thereof would depend on wage growth and on how households react to forecast higher inflation.