MPC resists action calls
THE Monetary Policy Committee defied growing calls for a fresh round of quantitative easing and left its position unchanged today.
The Bank of England’s rate-setting committee voted to keep interest rates at their historic low of 0.5% and maintain its programme of quantitative easing at £200bn.
Continuing uncertainty in the global economy and comments from the Chancellor predicting a downgrade in the Office for Budgetary Responsibility’s growth forecasts for 2011 had prompted speculation that the MPC may chose to launch a second round of quantitative easing.
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Senior stockbroker David Scott said: “Today’s decision to keep rates on hold and maintain QE at current levels was widely predicted as the economic winds turn decidedly icy, particularly those blowing over the channel.
“The debate on when will rates rise has now moved onto into which year rather than which month and I would not expect any decision on more QE until after the next quarterly Inflation report in November.”
Ian McCafferty, CBI’s chief economic adviser, said: “Although recent data has brought further evidence of slower economic activity and business confidence has weakened, it is not clear that this requires an immediate policy reaction.
“We hope the UK economy will be on a firmer footing by next year, when a lower inflation rate will bring some relief for households. However, the global downside risks remain acute, so the Bank must continue to monitor global developments very closely and be prepared to be flexible.”
Graeme Leach, chief economist at the Institute of Directors, said: “No change in policy was no surprise, but we still expect an expansion in quantitative easing before the end of this year.
“The continuing eurozone crisis, deteriorating consumer and business confidence and the weakness of the money supply mean that we are sailing close to a double-dip.
“The downside risks are considerable and for this reason the IoD is calling for an initial £50bn expansion in QE.”
