Interest rates held again as expected

THE Bank of England held interest rates at 0.5% for the 14th month in a row.

It had been widely expected that the Bank’s Monetary Policy Committee would would maintain the rate at their record low.

The MPC also decided against altering the £200bn it has so far spent on quantitative easing (QE), or printing money, to support the economy.

The decision – delayed from last week because of the General Election – was made amid the ongoing political uncertainty after the poll resulted in a hung parliament.

Economists have also noted that growth data released over the past month has been weaker than anticipated, while inflation has been stronger than forecast.

Interest rates have been at a record low for more than year and the bank completed a £200bn quantitative easing program of purchasing assets to boost the money supply in January.

Peter Hensman, global strategist at Newton Investment Management, said: “Despite the return of turmoil in financial markets as investors fret over the sustainability of the government debt positions in the periphery of Europe and the uncertainty created by the election out-turn in the UK, the Bank of England maintained an unchanged policy setting at the meeting of the Monetary Policy Committee. 

“This meeting had been delayed from the scheduled dates of 5, 6 May so as to avoid any appearance of influencing the election out-turn. 

“While the policy decisions of the future government will quite possibly impact on the choices made by the Bank, the budget consolidation likely from a Conservative led coalition and the expectation that inflation pressures will moderate over the remainder of the year should mean that policy will remain on hold for some time, despite the broadening indications of a cyclical improvement in the UK economy.”

Ian McCafferty, the CBI’s chief economic adviser, said: “The Bank of England’s decision to leave interest rates and its quantitative easing policy unchanged were expected, as the MPC will be waiting to see how the delicate economic situation develops.
 
“The news suggests that the economy is improving, but we still believe that growth this year will be modest.”