BoE policy makers voted 9-0 to keep interest rates on hold
Minutes of the Bank of England’s July meeting have been released today and have revealed that the Monetary Policy Committee (MPC) voted unanimously this month to keep interest rates at the historic low of 0.5%.
As well as the unchanged interest rate, there were no plans to expand the current £125 billion programme of quantitative easing but it has since been announced that the Bank will review the programme early next month.
The minutes showed that the shortage of bank lending was still weighing on the economy. Many housing economists and, indeed housebuilders, continue to stress that the lack of mortgage finance continues to hinder a recovery in the housing market.
The minutes also said: “Little evidence had emerged since May to change the Committee’s views about the broad shape of the prospects for the economy in the medium term, although the downside risks to GDP in the near term had probably diminished.”
However, the decision to extend its quantitative easing programme was criticised by the British Chambers of Commerce (BCC) stating it did not provide an “adequate explanation”.
David Kern of the BCC said: “We believe that the risks of a relapse in economic activity are still serious” and is urging the Bank to expand the programme next month.
Meanwhile with regard to interest rates, Howard Archer of IHS Global Insight believes they will stay at record lows well into 2010.
Interest rates have now been at 0.5% for four months and is the lowest level since the Bank was established over 300 years ago.
Earlier this month, the Office For National Statistics (ONS) confirmed that the UK economy shrank by 2.4% in the first quarter of 2009 – far worse than expected and the biggest quarterly decline in 51 years.
The ONS is scheduled to report the first estimate of second quarter GDP later this week.
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