Bank of England votes to keep base rate at 0.5% and QE at £275bln
Thursday, 08 December 2011 12:03
The Bank of England’s Monetary Policy Committee (MPC) has voted to maintain base rate at 0.5 per cent and retain the asset purchase programme of quantitative easing (QE) at £275 billion.
No new major policy initiatives were expected or decided upon in December’s meeting of the MPC. The committee judged that it was too early to increase the QE programme as it was expected that the extra £75 billion injected into the economy from October will take up to four months to filter through and for its effects to be judged.
However, most analysts believe that further asset purchases are likely, with February the month that most experts judge that there will be more money pumped into the economy.
Howard Archer, Chief UK & European Economist at IHS Global said: "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."
Despite more gloomy economic data emerging this week that showed manufacturing output dropped by 0.7 per cent in October which does not bode well for the fourth quarter GDP figures, the MPC decided to leave things as they were.
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.
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