Interest rates held again at 0.5%
THE Bank of England has today announced that interest rates will remain unchanged at 0.5% for the third consecutive month.
The move was widely expected and the focus has now shifted to the Bank’s other policies for getting money circulating in the system.
Last month it announced it would introduce an extra £50bn to the economy through quantitative easing, on top of the £75bn in April. The Bank is due to complete its £125bn spending on quantitative easing next month.
Chris Fletcher, deputy chief executive at Greater Manchester Chamber, said: “This decision was widely expected and will be welcomed by businesses.
“The Government is still waiting for measures such as quantitative easing to take effect. Therefore it is likely that interest rates will be held for several months to come.”
Business surveys and indexes over the past month have shown signs that the economy is stabilizing and that businesses are starting to see some signs of recovery sooner than expected.
Nick Boden, senior partner at PricewaterhouseCoopers in the North West, agrees there are tentative signs that the economy is beginning to stabilise.
He said: “We expect the Bank of England to remain in wait and see mode for a couple of months while it awaits more evidence on how effective the monetary and fiscal loosening already in the pipeline is proving to be. It can then decide if any further quantitative easing is needed beyond the £125bn of asset purchases already in progress.
“The rise in the pound in recent weeks will, if it persists, keep import prices down and reinforce the downward trend in inflation that we expect in the short term. This supports our view that we are still a year or so away from the point where the MPC is likely to start raising interest rates.”
Since the start of the banking crisis in September six cuts have brought the base rate down to the record 0.5% low 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.
