* BoE sticks to plan to buy 50 bln stg of gilts
* Most economists see further action in November
* Government launches measures to boost construction
By Sven Egenter and David Milliken
LONDON, Sept 6 The Bank of England stuck to its
current policy of government bond purchases on Thursday, as
Britain is creeping out of recession and hopes are running high
for a sweeping move by the European Central Bank to ease the
euro zone crisis.
Attention will now turn to the ECB's interest rate decision
and news conference, at which governor Mario Draghi is expected
to announce the framework for a new bond-buying plan aimed at
bringing Spain and Italy's borrowing costs down.
The crisis in the euro zone, Britain's main export market,
has hurt demand and made businesses reluctant to invest, adding
to the headwinds for growth from the government's tough
austerity plan to erase a huge budget deficit.
The government has announced a number of measures to get
credit flowing and boost infrastructure and house building
without spending taxpayers' money. But finance minister George
Osborne remains under pressure to loosen austerity.
Since the BoE's August meeting, a rebound in closely watched
business surveys has increased hopes that the economy is
crawling out of recession after three quarters of contraction,
though the road to a proper recovery still looks bumpy.
After the two-day meeting that ended earlier on Thursday,
the Monetary Policy Committee made no change to the current plan
to buy 50 billion pounds of British government bonds, which will
take its total purchases to 375 billion pounds by November.
The central bank also left its interest rate unchanged at a
record-low 0.5 percent, in line with a Reuters poll of
economists, who had all bet on an unchanged policy.
Sterling was steady and gilts were little changed after the
"The MPC's decision to leave policy on hold today was
unsurprising and may partly have reflected a desire to wait to
see what comes out of today's ECB meeting," said Vicky Redwood,
economist at Capital economics.
However, most see another dose of quantitative easing once
the current round is completed in November to support an economy
that has not fully recovered from the 2008-2009 slump and has
been back in recession since late last year.
"The economy is clearly still finding life very difficult;
and further stimulative action remains highly likely in the
fourth quarter," said IHS Global Insight economist Howard
The central bank and most economists see a tepid recovery as
inflation falls back towards its 2 percent target after output
is likely to be lower in 2012 than last year.
The Organisation for Economic Cooperation and Development
(OECD) became the latest organisation to slash its growth
forecasts, predicting a contraction of 0.7 percent this year.
The government launched a fresh set of reforms to the
planning system and announced 10 billion pounds in guarantees
for housebuilding on Thursday aimed at boosting construction,
which has been the main drag in the first half of 2012.
An unexpected drop in house prices in August reported by
lender Halifax on Thursday highlighted the sector's problems.
Meanwhile, data from the car manufacturing lobby SMMT showed
that new car registrations barely grew last month, though the
sector remains one of the few bright spots with 3.3 percent more
registrations in the first eight months of 2012 than last year.
But with any meaningful overall economic recovery elusive,
the debate among BoE policymakers about the right amount and
form of stimulus may have been lively at the latest meeting,
even after the departure of arch-dove Adam Posen.
Thursday's decision was the first for new rate-setter Ian
McCafferty, who joins the nine-member Monetary Policy Committee
from the Confederation of British Industry.
When the BoE launched the current round of gilt purchases in
July, chief economist Spencer Dale and external MPC member Ben
Broadbent voted against the extension.
They did not think the inflation outlook had improved enough,
and thought other steps to get credit flowing such as the bank's
recently started Funding for Lending Scheme could be sufficient.
However, others considered adding even more stimulus at the
The market will have to wait until the minutes of the latest
meeting are published on Sept. 19 to find out how the debate has