Preview: Bank of England's MPC December interest rate meeting
Wednesday, 07 December 2011 05:12
The Bank of England’s Monetary Policy Committee (MPC) meets tomorrow for its December rate setting meeting with no major monetary policy initiatives expected to be announced despite the threat of the UK falling back into recession.
The MPC has shown no signs so far that it plans to lower interest rates anymore from 0.50 per cent, the rate at which they have been since March 2009. The programme of asset purchases known as quantitative easing (QE) was extended by £75 billion in October and although most analysts believe this will be added to in the New Year, it seems unlikely that the MPC will make their move this month.
The additional programme of QE announced in October was expected to take four months to implement and it is thought from comments in last month’s MPC minutes that the markets would be unable to cope with any additional funds at this stage.
Howard Archer, Chief UK Economist at IHS Global said: “The minutes of the November meeting of the Bank of England’s Monetary Policy Committee were dovish overall, suggesting that further Quantitative Easing (QE) is much more likely than not – most probably early in 2012.”
It seems highly likely that the Bank of England will not raise interest rates until at least the midway point of 2013. The UK economy is facing rising unemployment, inflation is still above fiver per cent with wage settlements below half of that rate, consumer confidence is low and the threat of further damage to the economy from problems in the eurozone is still a serious threat.
Meanwhile, indications for GDP and economic growth in the final quarter of 2011 took a blow today when the Office for National Statistics (ONS) released official figures that showed industrial output slipped by 0.7 per cent in October.
Mr Archer said: “The 0.7% month-on-month fall in industrial production in October was particularly grim; and with November survey evidence on the manufacturing sector from the purchasing managers and the CBI also very weak, it seems that industrial production is set to see marked contraction in the fourth quarter. Also worryingly, the British Retail Consortium has reported that retail sales were very weak in November, and retailers appear to be in for a tough Christmas.”
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