MPC resists action calls
THE Monetary Policy Committee defied growing calls for a fresh round of quantitative easing and left its position unchanged today.
The Bank of England’s rate-setting committee voted to keep interest rates at their historic low of 0.5% and maintain its programme of quantitative easing at £200bn.
Continuing uncertainty in the global economy and comments from the Chancellor predicting a downgrade in the Office for Budgetary Responsibility’s growth forecasts for 2011 had prompted speculation that the MPC may chose to launch a second round of quantitative easing.
Responding to the decision, David Ost, North West director of EEF, the manufacturers’ organisation, said: “This decision is no surprise as even though inflation is still coming in uncomfortably high, the medium-term economic picture remains murky. With weak underlying growth, ongoing Eurozone troubles and volatile commodity markets, it is still too early for a rate rise.
“The more interesting news is likely to come later this month when we see if the new member shifts the balance of views on the Committee. However, it still seems a move on rates will not be forthcoming until the economic outlook becomes much clearer.”
Dr Brian Sloan, chief economist at Greater Manchester Chamber of Commerce, added: “The weak global economy will put further pressure on our growth as exports slow, but the Bank opted to resist calls for more quantitative easing to get the domestic economy moving for the time being.
“We are adamant that any further injection of money into the economy must have a regional focus to best deliver growth, and the Bank and the Government must work together to achieve this.”
Ian McCafferty, CBI chief economic adviser, said: “Although recent data has brought further evidence of slower economic activity and business confidence has weakened, it is not clear that this requires an immediate policy reaction.
“We hope the UK economy will be on a firmer footing by next year, when a lower inflation rate will bring some relief for households. However, the global downside risks remain acute, so the Bank must continue to monitor global developments very closely and be prepared to be flexible.”
