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Bank of England keeps stimulus program unchanged

Danica Kirka, Associated Press

Mark Carney, the new Governor of the Bank of England, walks to a monetary policy committee (MPC) briefing on his first day on the job inside the central bank's headquarters in London Monday July 1, 2013. (AP Photo/Jason Alden/Pool)

LONDON (AP) -- The Bank of England refrained Thursday from pumping more money into the U.K. economy, citing improved signs of growth, as it held its first meeting since the arrival of the new governor, Mark Carney.

The Monetary Policy Committee kept its key interest rate at the record low of 0.5 percent and decided against expanding its stimulus program, as widely expected in the markets.

The bank has so far pumped 375 billion pounds ($579 billion) into Britain's economy since 2009. Under the program, the Bank of England buys bonds from financial institutions with newly created money. The hope is the extra money will boost lending, helping economic growth.

In a statement, the Bank of England said that since May, "there have been further signs that a recovery is in train" — even though it was weak by historical standards.

Erik Nielsen, the global chief economist at UniCredit bank, had warned that even if Carney wanted to hit the "monetary accelerator", he would still need to persuade fellow MPC members. King had pushed for more stimulus, but had been outvoted.

Carney's interest in explaining policy choices to the public was perhaps behind the publication of a statement. Under the previous governor, Mervyn King, the bank would typically issue no comment when policy was left unchanged.

The bank also noted that it was planning to give an assessment next month to Treasury chief George Osborne on whether the bank should use forward guidance — an indication to the public on where interest rates are likely to be in coming months.

"This analysis would have an important bearing on the Committee's policy discussions in August," the statement said.

Carney used such thresholds during his previous job as the head of the Bank of Canada — the idea being that if people knew rates would remain low they would be more likely to borrow.

It helped stimulate spending and economic growth. The U.S. also uses this method, and analysts think Carney might try it in Britain.

"Any forward guidance on interest rates will be warmly greeted by homeowners, particularly those with tracker mortgages, who will be in a better position to budget and even forecast the right time to lock in," Alistair Cotton, senior analyst at Currencies Direct said in a statement.