Bank of England holds rate at 0.5%

THE Bank of England’s Monetary Policy Committee today resisted pressure to raise interest rates as the cost of borrowing remained at its record low of 0.5%.

The committee also voted to leave quantitative easing at £200bn.

There had been a feeling among some analysts that the MPC may bow to pressure and increase the money supply but concerns about the likely impact of the Comprehensive Spending Review later this month are thought to have influenced their decision.

Efforts to keep inflation at a minimum are also thought to have weighed heavily on the committee’s minds. The figure is currently above the Government’s 2% target and the committee has been anxious not to have it spiral out of control.

Business leaders in the West Midlands said last month they thought a fresh bout of quantitative easing could be on the agenda at future meetings of the MPC.

John Rider, chairman of the Institute of Directors in the region, was just one to suggest the poor supply of money was starving the local economy of growth.

Even with the rate remaining as it is, many think it is only a matter of time before the Bank is forced to review its policy.

He said last month that the region’s economy was still too fragile to be able to stand an increase in the cost of borrowing and with slowing growth in manufacturing output any attempt to change the status quo could prove costly.