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Saturday 09th of January 2010
November 5, 2009    

Base rate held at 0.5% plus £25bn boost for UK economy

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by Gill Montia
Base rate held at 0.5% plus £25bn boost for UK economy

The Bank of England’s Monetary Policy Committee has kept the base rate at 0.5% in November, as widely expected.

The historically low rate has been extended for the eighth successive month, in efforts to keep borrowing as cheap as possible as the UK struggles on in recession.

In addition, the Bank has announced that it will pump another £25 billion into the economy under its quantitative easing programme.

The amount is in addition to the £175 billion of support already provided.

The BoE’s policy on interest rates mirrors that of the US Federal Reserve, which earlier this week opted to keep interest rates at between 0% and 0.25%, despite the US economy returning to growth between July and September, unlike that of the UK.

More positively, new data in the form of the Purchasing Managers’ Index (PMI) shows that in October, the UK’s services sector (which accounted for two thirds of the British economy prior to the credit crisis) grew at the fastest pace in more than two years.

The index, which is reckoned to be healthy if over 50, climbed to 56.9 last month, up from 55.3 in September and 54.1 in August, to reach its highest point in over two years.

The PMI is based on five indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

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