No move for interest rates or QE
THE Bank of England today held back from pumping more money into the economy as it also held interest rates at their record low of 0.5%.
The Bank raised its Quantitative Easing programme to £275bn in October amid fears over the strength of the economic recovery.
The deepening Eurozone debt crisis continues to plague markets and gloomy forecasts about consumer spending over the usually busy festive period have done little to raise spirits.
Coverage of the MPC’s decisions is brought to TheBusinessDesk.com’s readers in association with stockbrokers Redmayne-Bentley.
Senior stockbroker David Scott said: “Today’s decision may have come as a surprise to some following on from yesterday’s manufacturing figures which made a clear case for more stimulus and a report from National Institute of Economic and Social Research, which estimated that the economy grew by just 0.3% in the three months ending in November, compared with 0.4% growth in the three months ending October.
“The MPC however remains in a holding pattern over Europe, which is the biggest factor affecting ours and the global economy at the present time.
“It has already signalled that it will wait until February before making a decision on whether to engage in more quantitative easing, as by then it will have completed the £75bn of asset purchases announced in October, taking the total QE spend to £275bn and hopefully the European mess will be clearer – for better or worse!”
Chris Parrish, group treasurer at Yorkshire Building Society, said: “Today’s decision to leave the Base Rate unchanged at 0.5% was widely anticipated across the industry.
“The Consumer Prices Index (CPI) inflation rate fell to 5.0% in October from 5.2% the previous month and although this is markedly higher than the Government’s target, the instability of the domestic and worldwide economies continues to be the principal factor in the MPC’s decision-making.
“Many economists now believe that the base rate will remain at its current level for the foreseeable future.”
Ian McCafferty, CBI chief economic adviser, said: “With the Bank’s current round of asset purchases likely to run into early next year, this decision to keep monetary policy on hold is in line with our expectations.
“Developments in the Eurozone remain the key risk to the UK’s economic prospects. While there are encouraging signs that progress will be made at this week’s summit, it’s clear that the situation is at a critical juncture.”
