Bank holds interest rate at 0.5%
Bank of England freezes interest rates
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Thursday, 09, Jul 2009 06:00
The Bank of England has kept the interest rate at 0.5 per cent for the fifth month in a row but will not spend more money on the quantitative easing scheme.
With inflation still in decline and mixed economic news, the central bank decided to keep the base rate stable.
Economic news has been mixed since the Bank's monetary policy committee (MPC) made its last decision in June.
While GDP fell at a quicker rate in the first quarter of the year than expected, the British Chambers of Commerce suggested the worst of the recession has now passed.
Analysts have predicted the rate is likely to remain frozen until the end of the year, which will assist borrowers on a variable rate but will lead to months of low returns for savers.
But the monetary policy committee decided not to expand its quantitative easing programme by a further £25 billion to £150 billion, as many had expected.
Recent figures show the Bank has spent £105.6 billion on buying up assets as part of its quantitative easing scheme – leaving the MPC just under £20 billion left to spend from the £125 billion set at the May meeting.
Brigid O'Leary, senior economist for the Royal Institution of Chartered Surveyors (RICS), said: "There has been some disappointment that the asset-purchasing scheme has not yet transpired into a more significant improvement in lending.
"However, it would be premature to declare that the scheme has been unsuccessful given that corporate bond yields have come down materially since the introduction of the programme."
The committee said it expects the programme will take another month to complete and will review the scheme at its August meeting, alongside its latest inflation projections.