Base rate held for sixth consecutive month

THE Bank of England today announced that interest rates will remain unchanged at 0.5% for the sixth consecutive month.

It also maintained its £175bn programme of quantitative easing – a system of pumping money into the economy – but did not extend it.

The move was widely expected and the Bank’s Monetary Policy Committee is likely to hold rates for many months to come.

However, there had been calls from some quarters for the bank to imposing a negative interest rate on bank reserves.

The British Chambers of Commerce had called on the MPC to consider a further cut in interest rates to encourage banks to lend money rather than store it.

It had also called on the MPC to lift quantitative easing above the existing £175bn ceiling to make sure ensure there is no relapse when the economy starts to recover.

However, Greater Manchester Chamber of Commerce instead said it wanted to see rates held again as its members are still facing fundamental issues and struggling to obtain loans from banks.

Chris Fletcher, deputy chief executive at Manchester Chamber, said: “There have been an increase in reports on the potential signs of economic recovery, however we remain to be convinced and believe there is some way to go in the recession.

“We believe that the MPC’s decision that rates should be held at 0.5% is the right one.”

He added: “A stable platform has been provided by the base rates remaining constant, but we want to see this impact positively on businesses operating on the front line, before any changes to interest rates are made.”

Meanwhile, Sonya Kapur, investment analyst at BNP Paribas Real Estate, said: “With a deluge of positive economic data over the last month, and the economy no longer shrinking month on month, it is reasonable to say that the economy is on track for a recovery. 

“But, rose tinted glasses aside, interest rates need to remain low to support this recovery.  An upward movement in interest rates will worsen the debt burden borne on consumers, and with unemployment levels expected to rise over the next year, any upturn in the economy now will not show through into rental growth for some time.

“Bearing this in mind we still expect All Property real rents to slow well into 2011.”