The Bank of England on Thursday voted to keep its main interest rate at a record low and maintain its level of Quantitative Easing stimulus measures despite a deepening recession in Britain.
"The Bank of England's Monetary Policy Committee (MPC) today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.50 percent," it said, adding QE funds would remain at £375 billion ($584 billion, 476 billion euros).
The central bank had been widely expected to keep its policy unchanged following its latest two-day meeting as it monitors the impact of last month's decision to ramp up QE funds by an extra £50 billion by November.
Since the July meeting, official data has revealed a deepening recession in Britain, which is struggling under government austerity measures and fallout from the eurozone debt crisis.
Shortly after Thursday's monthly policy meeting decision, the European Central Bank said it would hold eurozone borrowing costs at a record low level of 0.75 percent.
All eyes were now on ECB President Mario Draghi's regular news conference later Thursday after he raised expectations of firm action against the crisis by vowing last week to do "whatever it takes" to save the euro.
Britain is not a member of the eurozone but relies on the region for much of its trade.
Worse-than-expected data last week revealed that British Gross Domestic Product (GDP) dived 0.7 percent in the second quarter from the previous three months due to steep output falls in construction and manufacturing sectors.
The slump was the biggest quarterly fall since the first quarter of 2009 and marked the third quarterly negative reading in a row. A recession is defined as two quarters running of contraction.
Economists added Thursday that the BoE also wanted to wait to see the impact of the government's £80-billion 'Funding for Lending' scheme aimed at injecting growth into the Britain's economy by boosting lending by retail banks.
"Despite the continuing run of soft data, we now judge the MPC to be in 'wait and see' mode, as it assesses the impact of the recent QE increase and the Funding for Lending scheme," said Victoria Clarke, an economist at Investec banking group.
Markets must wait until August 15 for the publication of MPC minutes from the August gathering, for an insight into the committee's reasoning.
In another heavy blow to the nation's hopes of recovery, a key survey on Wednesday showed that British manufacturing output shrank by the biggest amount in more than three years in July.
The purchasing managers' index (PMI) by Markit research group stood at 45.4 points last month -- the lowest level since May, 2009 -- and down from 48.6 in June. A reading under 50 indicates contraction.
Under QE, the BoE creates new cash to purchase assets such as government and corporate bonds with the aim of boosting lending and economic output.
The Funding for Lending plan, which began on Wednesday, is aimed at lifting lending to households and businesses and ward off a tightening credit squeeze amid the ongoing eurozone debt crisis.
Under the scheme, lenders are allowed to borrow from the Bank of England for up to four years. As security, they will have to provide assets like business or mortgage loans.
The scheme aims to free up the log jam in credit hitting the economy, by offering banks cheap finance on the condition they pass it on to borrowers.
It is hoped that this will help clear the blockage in credit lines which has hampered the country's recovery from the 2008 global financial crisis.
