Bank of England keeps base rate at 0.50% and QE at £325bn

The Bank of England’s monetary policy committee (MPC) has voted to hold interest rates at a record low of 0.5 per cent for the 38th month running.

It has also ruled out making any addition to the quantitative easing (QE) asset purchase programme.

The announcement to keep interest rates unchanged was widely expected, with analysts predicting base rate to remain at 0.5 per cent for the rest of this year and into 2013.

QE currently stands at £325 billion after a further injection of £50 billion was made in February.

Purchasing managers index (PMI) figures for March, released this week from the manufacturing, construction and services sectors, have all been positive.

This indicates that the economy has probably grown in the first quarter of 2012 and the UK could avoid a double-dip recession as a result.

But figures from the Organisation for Economic Co-operation and Development (OECD) suggest that the UK is likely to have slid back into recession during the first three months of this year.

If the economy does grow, further QE stimulus of around £25-£50 billion – which experts are forecasting for May – could be postponed indefinitely.

Meanwhile, the US Federal Reserve has hinted that more QE is unlikely, but the US economy is recovering at a quicker pace than its UK and European counterparts.

The minutes from the March MPC meeting revealed that two members, Adam Posen and David Miles, voted to resume the asset purchase programme and their views were unlikely to have changed this month.

But there had been no indication that the seven other members would change their minds about holding off on further QE.

A full breakdown of how the members voted is set to be released on April 18.

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