The Bank of England and the European Central Bank both maintained their interest rates on Thursday, but the BoE unexpectedly boosted the size of its asset-purchase program by £50 billion, reflecting its concern about the state of the economy.

The BoE’s Monetary Policy Committee voted to maintain the official bank rate at 0.5% and to boost its programme of asset purchases financed by the issuance of central bank reserves by £50 billion to £175 billion. At the same time, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 1.00%, 1.75% and 0.25%, respectively.

“It was expected to be a completely uneventful day for policy decisions from the Bank of England and European Central Bank. The ECB did meet these expectations,” note Toronto-Dominion Bank economists. “The Bank of England, on the other hand, signalled it is still concerned that the economy does not yet have enough stimulus in the pipeline.”

Indeed, in its accompanying policy statement, the BoE noted that the world economy remains in recession, and, “financial market strains have eased and banks’ funding conditions have improved a little, although financial conditions remain fragile.” It also said that “the recession appears to have been deeper than previously thought” in Britain.

TD notes that the BoE will release further details of its expanded asset-purchase plan in its upcoming inflation report, due Aug. 12. “This appears to be a decision to err on the side of caution,” TD adds. “We still believe the BoE could be one of the first of the major central banks to raise rates in 2010, as their aggressive policy choices seem more appropriat than those of the ECB relative to their respective economic fundamentals.”