Bank of England maintains cautious stance on interest rates

THE Bank of England has maintained its cautious stance on interest rates opting to keep the level at 0.5%.

The Monetary Policy Committee also held off from a further injection of quantitative easing, maintaining the level at £375bn.

Maintaining the status quo was always the likeliest course of action after figures last month showed the UK’s economy shrank 0.3% in the final quarter of last year, increasing concerns about a possible triple-dip recession.

With output falling and sterling under pressure, the Bank needs to try and create the best possible conditions for growth.

Business leaders have said they want more firms to be able to tap into the finance they need if they are to help get the economy going again.

Last month’s GDP figures showed production output had fallen by 1.8% in the final quarter of 2012, with manufacturing shrinking 1.5%.

The low rate of interest is coming up for its fourth anniversary in March and some analysts have predicted that with growth predictions flat, the figure could remain at its current level for some time to come – possibly until well after the current Parliament and even into 2017.

Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, said: “Low interest rates are crucial to get the economy moving again.

“But figures last week showed that, while rates are low, lending to business fell massively in 2012 compared to the previous year.

“The Government introduced a new Funding for Lending scheme last year but while it appears to be assisting mortgage lending, we need to see it having a positive impact on lending to businesses.”

She said small businesses wanted to see plans for a new Business Bank brought forward to give firms better access to finance.

“We have also seen this week George Osborne’s announcement on the Banking Reform Bill. While regulation is clearly required in the banking sector, it is vital that any reforms do not place a further obstacle in the way of businesses accessing the money they need to grow,” she added.