Interest rates held at 0.5%
THE Bank of England kept the cost of borrowing steady today by holding the base rate at 0.5%.
The move was widely expected and the focus has now shifted to the Bank’s efforts to manipulate the economy by injecting new cash into the system.
Last month it introduced a policy of printing new money – known as quantitative easing – for the first time. The Bank is prepared to inject up to £75bn into the economy by buying assets such as government securities and corporate bonds.
So far it has pumped £26.4bn into the system and the Bank said today it would take a further two months to complete the programme.
Damian Waters, North West regional director of business organisation CBI said: “The previous cuts will take time to filter through to the factory floor and to other businesses too. The Bank has done what it can to improve the economy by cutting rates rapidly over the last six months, but now needs to look at the other tools it has in the box.
“Chief among these is quantitative easing and the Bank has to judge carefully the pace at which it purchases assets and I think perhaps they need to accelerate this pace in order to tackle the log jam of capital.”
Chris Fletcher, deputy chief executive of Greater Manchester Chamber of Commerce, said: “We’re pleased to see this hold. We called for a hold last time, but unfortunately the committee decided on a cut.
“The economy is in a state of flux at the moment, with conflicting data and forecasts and a potentially challenging Budget looming in a few weeks’ time.
“The focus has moved from interest rates for now, as everyone tries to assess what impact quantitative easing will have and the rate of inflation has become the figure everyone is watching.”
Since the start of the banking crisis in September six cuts have brought the base rate down from 5%. Many economists now expect the Bank to hold at 0.5% until next year.
The string of rate cuts has been welcomed by homeowners with tracker mortgages but criticised by savers who have seen growth on deposits vanish.
