Bank of England retains rates at record low for three years

THE Bank of England today marked the third anniversary of record low interest rates by opting to continue the status quo.

The rate has now remained at 0.5% for 36 straight months.

Any move to change rates prior to this month’s Budget was thought unlikely and the Monetary Policy Committee did not disappoint.

There was also no repeat of the fresh round of quantitative easing announced last month, when the MPC gave the green light to a £50bn expansion of the Bank’s QE programme taking the overall total to £325bn.

The move came as little surprise to business leaders in the West Midlands, who had been expecting the MPC to err on the side of caution.

The Birmingham Chamber of Commerce Group (BCCG) said it expected the rate to remain at 0.5% until the final months of 2013, followed by modest increases.

Mike Ward president of BCCG said the Chancellor had to “pull out all the stops” to enable businesses to drive growth in the UK and keeping interest rates low would help.

He said: “Quantitative easing is at £325bn and keeping it at this level will benefit the economy.  However, what would be more effective and helpful is if the MPC bought private sector assets, instead of focusing exclusively on gilts.

“The West Midlands economy is still facing serious challenges but we do expect to avoid a double dip recession.”

Sara Fowler, senior partner for Ernst & Young in the Midlands, said: “In the Midlands we are continuing to see signs of improvement in the local economy. Figures released this week show that the manufacturing sector maintained growth during February which is positive news for firms across the Midlands. It was also reported this week that employment levels continue to improve in the region and are ahead of the national trend.

“I still believe that businesses across the Midlands should be focussed on entering fast-growth international markets in the current climate. This will allow them to find growth and secure long-term financial stability.”

Mark Smith, regional chairman at PwC in the Midlands, said: “It has been three years since the Bank of England reduced interest rates to a record low of 0.5% in an effort to get the economy back on track and this is unlikely to change in the short term.

“The MPC will want to see last month’s injection of quantitative easing take some effect and be sure that the economic recovery is strong and secure before increasing rates.

“Despite the continuing economic uncertainty, it is good to see some positive news coming out of the manufacturing sector this week and the impact this could have in terms of job creation. As a manufacturing hub, the West Midlands is likely to benefit from this, which will go some way to boosting business confidence locally.”