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Bank of England unanimous on monetary policy

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(GlobalPost/GlobalPost)

Bank of England policymakers voted unanimously earlier this month to maintain both record-low interest rates and stimulus funding, but expressed caution over the economic outlook, minutes showed on Wednesday.

The bank's monetary policy committee (MPC) voted 9-0 to freeze its key lending rate at 0.50 percent, where it has stood since March 2009 in order to stimulate growth.

The MPC were also united in their decision to maintain its bond-buying quantitative easing (QE) scheme at £375 billion ($605 billion, 447 billion euros) at their meeting held on November 6-7.

The BoE added that it expected Britain's economy to grow by 0.9 percent in the fourth quarter of this year, and noted that surveys indicated expansion of more than 1.0 percent.

"Fourth-quarter GDP growth was expected to pick up further in the near term as the lifting of uncertainty and the thawing of credit conditions continued to bolster demand growth," it said.

"That near-term outlook was a little stronger than three months ago, primarily reflecting the increasingly positive tone of recent survey data."

The economy had expanded by 0.8 percent in the third quarter, or July-September period, which was the fastest growth rate for more than three years.

However, policymakers cautioned in the minutes that "there were uncertainties over the durability of the recovery", and cited ongoing fallout from the debt crisis in major trading partner the eurozone.

"The external environment continues to pose the greatest threat to the recovery; in particular, the necessary adjustments to indebtedness and competitiveness within the euro area may yet prove to be a much greater drag on growth," the minutes read.

Activity could also be hit as British households cut their spending in order to pay down debts.

"Overall, the balance of risks (for economic growth) was judged to be to the downside," the minutes concluded.

Earlier this month, the BoE had declared that Britain's economic recovery "has finally taken hold" as it upgraded its growth forecasts despite headwinds from the eurozone crisis.

The bank had added that unemployment could fall faster than expected, but sought to soothe fears that interest rates could rise sooner than anticipated.

The BoE expects Britain's unemployment rate to drop to a key threshold of 7.0 percent by the third quarter of 2015. It does not plan to raise interest rates until the unemployment rate falls to at least the threshold.

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http://www.globalpost.com/dispatch/news/afp/131120/bank-england-unanimous-monetary-policy