Bank of England keeps base rate at 0.5% and QE at £275 bln
Thursday, 10 November 2011 12:02
The Bank of England’s Monetary Policy Committee (MPC) has kept base rate at 0.5 per cent for a 32nd consecutive month in a move that was widely anticipated.
The MPC also voted to keep the quantitative easing programme at £275 billion after voting to inject a further £75 billion into the UK economy at their meeting last month.
A rise in interest rates is very unlikely in the foreseeable future, with most analysts not expecting to see any movement above 0.5 per cent until at least 2013. The UK economy is struggling for growth and the events in the eurozone and their potential effect on the UK are contributing to a lack of confidence in all areas of the UK economy.
Howard Archer, Chief UK & European Economist for IHS Global said: "No surprises from the Bank of England. It was always a safe bet that the November’s MPC meeting would not result in any major policy developments from the Bank of England given that the extra £75 billion of Quantitative Easing that was announced last month is expected to take four months to complete.
"Meanwhile, there seems to be little appetite within the MPC for taking interest rates lower than 0.50% and it is notable that the Bank of England did not do this even at the height of the 2008/9 recession."
The minutes for this months’ meeting will be released in two weeks time and it will be interesting to see if there was any discussion on implementing a quarter point rate cut, to take base rate down to 0.25 per cent.
It is likely that the main discussion points in the meeting will have revolved around how to contain and the likely near-future movement of the consumer prices index measure of inflation.
Ray Boulger of leading independent mortgage adviser John Charcol comments on the issues that the MPC will have to focus on in the next few months: “The major worry for the UK is not only the negative impact on our economy as a result of the rapidly spreading contagion in the Eurozone but also the extent to which UK banks will be forced to curtail lending as a result of the inevitable write offs from their Eurozone exposure."
The recent slew of mixed economic data, which saw a rise in manufacturing, but a fall in exports as revealed by the increased trade deficit, will have led to a discussion on revising economic growth forecasts for the rest of this year and 2012.
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