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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 tenth month in a row.

In addition, there is unlikely to be any change with regard to its quantitative easing (QE) scheme but growing signs that the UK has finally exited recession is expected to see an end to the scheme next month, according to many economists.

QE, also known as printing money, is a process whereby the Treasury injects funds into the financial system to ease pressure on banks by giving them extra capital.

In November, the Bank announced that it would pump another £25 billion into the economy under its QE programme.

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

“The Monetary Policy Committee is likely to wait for February’s inflation report before reviewing its asset purchase programme,” according to Vicky Redwood at Capital Economics.

In the meantime, data published this week showed manufacturing and services sectors growing at their fastest pace in two years.

Both sets of figures are likely to boost hopes that the UK will have emerged from recession in the fourth quarter of 2009. Figures due later this month are expected to confirm this.

Britain has been lagging behind other economies and is now the last major economy that is still in recession.

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

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News posted: January 7, 2010

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