Breaking News: Interest rates held again
THE Bank of England has held rates for the ninth successive month.
It also chose to leave its £200bn money printing scheme – known as quantitative easing – unchanged after increasing it by £25bn last month.
Quantitative easing (QE) aims to stimulate the economy by printing money and using it to buy bonds from financial institutions.
With the economy still in recession many economists believe QE will trigger a recovery. But it has its detractors who fear it is stoking future inflation.
In November the Bank said the latest tranche of QE cash would take three months to work through the system. The scale of the programme will be kept under review.
Peter Hensman, global strategist at Newton Investment Management, said: “With financial and economic conditions having stabilised from the turmoil of 2008, the Bank has reverted to its bias of altering policy on a quarterly basis so that any change in stance can be supported by the Inflation Report.
“With little change in the broader macro settings in the Pre-Budget Report, this is unlikely to have had a significant impact on the Bank’s decision.
“The slowing rate of purchases under the quantitative easing program clearly suggest that the Bank is looking to end its active policy support. However with concerns still high about the pace of recovery and the extent of the overhang of spare capacity it is unlikely that the Bank will move quickly to raise interest rates.”
Ian McCafferty, CBI chief economic adviser, said: “It’s not a surprise that the Bank has taken no new action, as the latest round of quantitative easing announced last month is due to continue until February.
“Economic growth will be anaemic at best across 2010, so the Bank will have to continue looking to monetary policy levers for some time yet, and interest rates are likely to remain low for some time.”
Corin Taylor, senior policy adviser at the Institute of Directors (IoD), said: “Money supply growth is still anaemic, but the Bank of England’s decision not to expand QE for the moment was expected.
“Conditions still remain very tough out there for businesses, with VAT rising in January, and the MPC will need to re-examine the case for a further expansion of QE in the New Year. With fiscal tightening after the election, monetary policy will need to remain very loose in order to prevent a double-dipper or even a triple tumble scenario.”
