Interest rates held for sixth month
THE Bank of England has kept the base rate at 0.5% for the sixth successive month.
It also maintained its programme of quantitative easing – a system of pumping money into the economy – but did not extend it.
The Bank’s Monetary Policy Committee (MPC) last month increased the size of the quantitative easing program by £50bn to create up to £175bn on the UK’s balance sheet to try to help banks to bring lending back into the economy.
Commenting on the noon decision by the MPC to hold interest rates for a further month, Gary Williamson, chief executive of the Leeds, York and North Yorkshire Chamber of Commerce, said: “Today’s decision to hold interest rates will be welcomed by the local business community.
“The Bank of England needs to allow time for its earlier economic remedies to take full effect before committing to further interest rate changes.
“It is the business community that creates revenue and jobs, so the Bank of England must continue to introduce initiatives, such as further quantitative easing, that will increase the available money supply and improve the lending abilities of banks to businesses, which will in turn generate additional investment and encourage economic growth.”
Recent data has suggested that the UK has begun to climb out of the recession.
National Institute of Economic and Social Research said the UK economy grew 0.2% in the three months to August.
Interest rates have been lowered to a record level to try to boost lending in the economy.
The aim of quantitative easing is to encourage individual banks to expand their balance sheets – moving their reserves into something that offers a higher return, such as making new loans – and so increasing the supply of money in the economy.
Sonya Kapur, investment analyst at BNP Paribas Real Estate, said: “With a deluge of positive economic data over the last month, and the economy no longer shrinking month on month, it is reasonable to say that the economy is on track for a recovery.
“But, rose tinted glasses aside, interest rates need to remain low to support this recovery. An upward movement in interest rates will worsen the debt burden borne on consumers, and with unemployment levels expected to rise over the next year, any upturn in the economy now will not show through into rental growth for some time.”
Ian McCafferty, chief economic adviser at the CBI, said: “It is not surprising that the Bank has chosen to keep things as they are, given the big decision on QE taken last month.
“The statement from the MPC tells us relatively little, though the minutes released later this month should be more revealing. They may give an insight into the extent to which QE is having an impact, and whether the Bank feels that its measures, which help the commercial banks, are also feeding through to the wider economy.”
