By Svenja O’Donnell Sept. 10 (Bloomberg) -- The Bank of England said it plans to keep buying as much as 175 billion pounds ($290 billion) in assets to cement the economy’s recovery from the worst recession in a generation. The decision by the nine-member Monetary Policy Committee, led by Governor Mervyn King, was forecast by all 35 economists in a Bloomberg News survey. The central bank also kept the benchmark interest rate at 0.5 percent, as predicted in a separate survey of 60 forecasts. Signs that the economy is returning to growth helped push the U.K.’s benchmark FTSE-100 index above 5,000 for the first time in almost a year yesterday. While King last month argued for even more bond purchases by the central bank, today’s decision suggests most officials are convinced the recovery is on track for now. “Just because they’ve done nothing today doesn’t mean they won’t do anything in the future,” said Brian Hilliard, chief economist at Societe Generale SA and a former Bank of England official. “The economy is turning round but we are underperforming continental Europe. The third-quarter growth outlook is miserable. We’re out of recession probably but in an anemic way.” The pound rose as much as 0.4 percent after the decision to $1.6580 and was at $1.6557 as of 12:15 p.m. in London. Some investors had speculated the Bank of England may cut the interest it pays commercial banks on deposits today in an effort to encourage lending. The bank has kept its rate at a record low since March to fight the economic and financial crisis unleashed by the collapse of Lehman Brothers Holdings Inc. a year ago. The European Central Bank kept its benchmark interest rate at 1 percent for a fourth month on Sept. 3. The U.S. Federal Reserve’s target range is zero to 0.25 percent. Brown’s View Prime Minister Gordon Brown, who faces a general election in less than a year, wants to avoid complacency and keep up stimulus measures as the economy shows “interesting and encouraging” signs, his spokesman said yesterday. The recession probably ended in May, the National Institute of Economic and Social Research, whose clients include the central bank and the Treasury, said this week. House prices rose 0.8 percent in August, Lloyds Banking Group’s Halifax division said today, while a survey of services companies showed the fastest pace of expansion in almost two years. Redrow Plc, the U.K. homebuilder that saw founder Steve Morgan rejoin management in March, said today that reservations for new homes in the first 10 weeks of its financial year rose 72 percent from a year earlier amid “strong buyer demand” after the housing market stabilized. Stocks Fall The FTSE-100 was at 4968.13 as of 12:15 p.m. in London. The benchmark stock index rose above 5,000 yesterday for the first time since October and has increased 34 percent in the past six months. “Things are looking up in the economy,” said Neville Hill, an economist at Credit Suisse Group in London and a former U.K. Treasury official. “The flow of the data in the past month does not press them urgently into doing more.” The global recovery is prompting some officials to discuss withdrawing stimulus. The U.S. Federal Reserve signaled in minutes published Sept. 2 that it’s already trying to prepare investors for an end to some of its asset purchases. ECB President Jean-Claude Trichet last week outlined how his central bank will withdraw stimulus, though he stressed it’s “premature” to say the crisis is over. Lending Concerns King is nevertheless concerned that banks aren’t lending enough and he said last month they have “a very long way to go” before capital is rebuilt. Royal Bank of Scotland Group Plc and Barclays Plc, two of Britain’s biggest banks, have cut lending even after promising the government to make more credit available. Manufacturing activity still showed contraction in August after growth the previous month, a survey of factories showed. Mortgage approvals, which rose above 50,000 in July, still remain half the total in the same month two years ago. King sought 200 billion pounds in asset purchases last month in a minority vote backed by David Miles and Timothy Besley, who left the panel on Aug. 31. In June 2007, when King last dissented from the majority because he wanted an interest- rate increase, the panel supported it at the next month’s decision. Deputy Governor Charles Bean said last month that the effects of the purchases so far have been “moderately encouraging” and that gilt yields are as much as 75 basis points lower than they would otherwise be. He said that it is still “very early to draw conclusions” on the plan’s efficacy. The bank has bought about 140 billion pounds in assets so far. The yield on the 10-year gilt was at 3.75 percent today, up from 3.02 percent at the start of the year. The yield fell as low as 2.933 percent on March 13, two days after the central bank said it would start its asset purchase program. “While it’s still a pretty uncertain recovery story at the moment, they’ve still got plenty to go through,” said James Knightley, an economist at ING Financial Markets in London. “It’s all looking a lot healthier so for the moment they don’t need to do anything else.”

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