UK interest rates remain unchanged at 0.5%

| April 9, 2009 | 0 Comments

As widely expected, the Bank of England has kept interest rates unchanged at 0.5%, bringing an end to the aggressive cuts it has implemented over the last six months to bring inflation down and fight off a prolonged recession.

Many analysts said a further rate cut would have had little benefit since banks are unlikely to pass the cut onto borrowers but it would continue to impact negatively on savers.

After last month’s interest rate cut, it was announced that the Bank of England would implement quantitative easing (also known as printing money) - a process whereby the Treasury injects funds into the financial system to ease pressure on banks by giving them extra capital. The aim is to increase lending levels in commercial banks.

The Bank has said that it will inject £75 billion into the economy in the next few months, with a further £75 billion available if required.

According to Howard Archer of IHS Global Insight, quantitative easing is now at ”the forefront of the Bank of England’s attempts to stimulate economic recovery“, rather than further interest rate cuts.

Since October, interest rates have been reduced from 5% to 0.5% currently - the lowest level since the Bank was established over 300 years ago.

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