Breaking News: Bank holds rates and rejects calls for more QE
THE Bank of England rejected calls for a new bout of quantitative easing today and kept rates at an historic low of 0.5%.
Despite moves by the US Federal Reserve to pump a further £372bn into the economy over the next eight months the Bank has decided to hold steady.
Further quantitative easing in the UK could stoke inflation which is already above the Bank’s 2% target at 3.1%. This compares with 1% in the US. The employment picture is also brighter with unemployment 2% lower than in the US.
The Bank has also been encouraged by positive economic data which has shown stronger than expected growth over the last six months as the economy emerges from recession.
No major bank expected a change in policy from the Monetary Policy Committee which has already committed £200bn to buying up bonds and gilts in a bid to boost the economy.
David Ost, the North West region director of manufacturers’ organisation the EEF, said: “The MPC is right to maintain its ‘no change’ policy. Although the UK has seen a strong, manufacturing-led recovery, the committee will have had to weigh the risks to growth from currency wars and public sector cuts against concerns that persistent inflation and the VAT rise would fuel price and wage pressures. Currently, there is no clear case for a move in either direction.
“Further pressure for more quantitative easing should also be resisted. Whilst manufacturers know that future growth cannot be taken for granted, they fear that further QE would simply store up longer-term problems with minimal benefit to the recovery.”
