Rates held at 0.5% again

THE Bank of England has held rates for the tenth successive month.

It also chose to leave its £200bn money printing scheme – known as quantitative easing – unchanged after increasing it by £25bn in November.

Quantitative easing (QE) aims to stimulate the economy by printing money and using it to buy bonds from financial institutions.

With the economy still in recession many economists believe QE will trigger a recovery. But it has its detractors who fear it is stoking future inflation.

In November the Bank said the latest tranche of QE cash would take three months to work through the system. It has made purchases of £193bn since the policy was first announced in March.

The manufacturing lobby group, the Engineering Employers’ Federation, said it supported the decision to hold rates and continue with the asset purchase programme.

Chief economist Lee Hopley said: “The recovery is now underway but its strength remains in doubt. There are a number of potential pitfalls even as the UK economic starts growing again, including cautious consumers, questions over the public finances and a still-fragile banking system. The MPC is right to stick until the economic picture becomes clearer.”

Brian Sloan, head of business and economic policy at Greater Manchester Chamber of Commerce, said: “There remains uncertainty over future inflation movements and the current level of asset purchases will not be complete until February, so the committee is adopting a ‘wait and see’ approach.

“However businesses in Greater Manchester continue to report difficulties accessing finance and relatively high levels of interest rate charges so we would like to see both the Bank and Government do more to encourage lending to businesses beyond the measures announced in the pre-budget report.”