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3 central banks stand pat on rates, China increases by 10 basis points

Three central banks left interest rates unchanged Thursday, while the People's Bank of China made a 10-basis-point increase in the aftermath of a rate hike from the U.S. Federal Reserve on Wednesday.

The Bank of England's monetary policy committee held the bank's key rate at 0.25%, while Norway's Norges Bank's executive board kept its rate at 0.5%. Bank of Japan also stood pat on rates, deciding to continue to apply a negative interest rate of -0.1%.

Hours after the Fed's quarter percentage-point move, the People's Bank of China increased the rates it charges in open-market operations and on its medium-term lending facility.

The central bank said markets expected higher borrowing costs and that open-market rate increases don't necessarily equate to interest-rate hikes, according to a statement. With the economy steady, inflation rising and real lending costs going down, financial institutions have strong incentives to expand credit, and housing prices have surged in some cities, it said.

The cost of seven-, 14- and 28-day reverse-repurchase agreements was raised 10 basis points each. That followed an increase in early February. Seven-day reverse repos were offered at 2.45%, 14-day reverse repos at 2.6% and 28-day reverse repos at 2.75%. Cost of funds lent via the medium-term lending facility increased by 10 basis points, with 6-month and 1-year rates raised to 3.05% and 3.2%. MLF rates were also increased in late January.

The Bank of England voted to maintain its asset purchase program of sterling non-financial investment-grade corporate bond purchases, totaling £10 billion ($12.3 billion) over the course of an 18-month program started in August, as well as to continue quantitative easing through U.K. government bond purchases at a total of £435 billion, it said in a statement.

Ian Kernohan, economist at Royal London Asset Management said: "A reduction in the equilibrium unemployment rate, supported by a softening in wage pressures in the latest labor market report, suggests interest rates will remain on hold for now.

The Bank of Japan said in a separate statement it will continue to purchase Japanese government bonds at the current pace of ¥80 trillion ($700 billion) annually in order to keep 10-year Japanese government bond yields around zero.

Japan's central bank said it will continue its purchases of exchange-traded funds and Japan real estate investment trusts at an annual pace of ¥6 trillion and about ¥90 billion, respectively, while maintaining the amount of commercial paper and corporate bonds outstanding at about ¥2.2 trillion and about ¥3.2 trillion, respectively.

Monetary policy decisions in Europe were in line with market expectations that key rates will remain lower.

"Executive board's current assessment of the outlook suggests that the key policy rate will most likely remain at today's level in the period ahead," Oystein Olsen, Norges Bank governor, said in a statement.

Bloomberg contributed to this story.