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BoE widely expected to leave interest rates at 0.5% today

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by Kay Mitchell

The Bank of England’s Monetary Policy Committee (MPC) is today expected to keep UK interest rates on hold at the historically low level of 0.5% for the ninth month in a row.

Last month, the Bank announced that it would pump another £25 billion into the economy under its quantitative easing programme.

The amount was in addition to the £175 billion of support already provided. This is also likely to remain unchanged, according to analysts.

“Last month’s decision set the scene until February, which we expect to be the next focal point for UK monetary policy,” said Philip Shaw, economist at Investec.

“We would be shocked if there were any result other than the Bank rate remaining on hold and the QE target fixed at £200bn,” he added.

However, minutes of the Bank’s November meeting showed that the MPC was split three ways over whether to increase its quantitative easing (QE) programme.

Seven members of the nine-strong committee voted for the £25 billion expansion of QE, while David Miles called for QE to be increased by £40 billion in “order to provide greater insurance to the downside risks to growth and inflation”.

However Spencer Dale, the Bank’s chief economist, voted for no increase at all, arguing that more funds injected into the economy might result in “unwarranted increases in some asset prices that could prove costly to rectify.”

The Bank of England will announce its decision at 12.00pm today.

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News posted: December 10, 2009

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