The Bank of England left interest rates at 0.5 per cent and kept its asset-buying programme on hold today following signs Britain's economic recovery is not slowing as rapidly as feared.
The BoE's decision contrasts with a move by the US Federal Reserve yesterday to buy $600 billion of bonds with new money over the next eight months, after what it called "disappointingly slow" progress towards its economic targets.
Sterling hit a nine-month high against the dollar and gilts extended losses to hit a session low down more than half a point on the day, as some in the markets had seen an outside chance that the BoE might follow in the Fed's footsteps.
Unexpectedly strong UK growth data for the third quarter and surveys indicating that manufacturing and service sector activity is still growing may have encouraged BoE policymakers to hold off injecting any further monetary stimulus for now.
But there is a chance the UK central bank may eventually decide that more stimulus is needed to shore up the economy against deep government spending cuts, and a significant number of analysts reckon that could come in February.
One Monetary Policy Committee member, Adam Posen, voted in October for a £50 billion expansion of the BoE's £200 billion asset purchase programme and is likely to have done the same this month, while Andrew Sentance will probably have reiterated his call for higher rates.
Minutes to this week’s meeting published on November 17th will reveal whether either man was able to win broader support on the MPC.
Reuters