Bank of England holds off on QE

THE Monetary Policy Committee resisted the temptation to pump more money into the economy today.

The decision not to embark on a fresh round of quantitative easing comes just hours after new data on the services sector was more upbeat than expected.

International Monetary Fund head Christine Lagarde’s suggestion that the Bank of England’s base rate could be cut its their historic low of 0.5% also went unheeded by the MPC.

However, with no imminent end in sight to the eurozone crisis experts expect QE to return to the MPC’s agenda in the coming months.

The services purchasing managers index remained unchanged in May at 53.3 when a slowdown in output was expected.

The construction PMI, published yesterday, showed that output grew in May but at a slower pace.

Commenting on today’s decision by the Bank of England, EEF North West Region Director, David Ost said:
 
“The decision to hold steady on policy was largely expected but, with a range of indicators for the UK economy on the slide this is likely to be a wait and see position. 

“The risks to growth seem to be building and, another expansion in asset purchases may be called on to get the economy out of reverse gear.”

Anna Leach, head of economic analysis at the CBI, said: “Both official and survey data continue to present a mixed picture of the economy, so this decision would have been a tricky one.

“It seems that a ‘wait and see’ position has been adopted for the moment. The ongoing crisis in the Euro area will continue to put pressure on fragile business conditions for the foreseeable future.

“But we still expect the UK economy to improve modestly later in the year, with further falls in inflation providing some support to family incomes.”