No action from central banks despite weak growth

Policymakers in the eurozone, UK and Japan have all resisted pressure to launch more stimulus measures, but economists and analysts say it is only a matter of time before central bankers spring back into action.

While no immediate change in policy was expected in Europe or Japan, until new governor Haruhiko Kuroda joins for the next meeting, there was some speculation that the Bank of England would extend its £375 billion stimulus programme.

Pound gains as Bank of England holds steady

Instead the UK monetary policy committee – which at its February meeting edged closer to lifting its aid programme – voted against either increasing its quantitative easing scheme or changing interest rates from their record low of 0.5%.

The British pound, which had been under pressure earlier on, moved higher to $1.5052 as expectations of more easing were dashed.

‘We continue to expect that the MPC will resume QE soon,’ commented Michael Saunders of Citigroup, citing weak business surveys and pressure on consumers.  

Britain’s central bank, which has raised expectations of more easing by providing signs that it is increasingly willing to temporarily forfeit higher inflation to stimulate growth, does not reveal more detail on the content of its meeting for two weeks.

'King is getting the market to do what he wanted – push yields and the pound back down – job done and no pressing urgency to actually deliver on the threat of more QE at this stage,' commented Scotiabank economist Alan Clarke.

Draghi smooths over Italian 'angst'

European Central Bank president Mario Draghi said that the governing council 'had discussed the possibility' of cutting the Bank's main rate of 0.75%, 'but we are not committing to or planning anything special' he told journalists at his monthly press briefing.

The ECB's decision, accompanied by a trimming of its GDP forecast for 2013, comes amid continuing economic weakness in the euro bloc and growing tensions after Italy's inconclusive election.

Draghi played down the potential impact of political gridlock in his native Italy, calling it the 'angst of the week' and saying that 'the ball is in the government's hands'.