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Tuesday 23rd of February 2010
January 20, 2010    

Bank voted 9-0 to hold rates and QE programme

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by Kay Murchie
”Bank

Minutes of the Bank of England’s January 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%.

Furthermore, all nine members of the MPC opted to leave its quantitative easing (QE) programme unchanged at £200 billion.

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.

However, according to analysts, the MPC has been sitting tight and waiting for fourth-quarter GDP figures - which will be published next week by the ONS.

The economy, which has now contracted for six consecutive quarters, has been lagging behind other economies and is now the last major economy that is still in recession.

Meanwhile, higher than expected inflation figures boosted the prospect that the Bank of England may raise interest rates in the short-term.

Yesterday the ONS announced that Consumer Price Inflation (CPI) rose at its fastest annual pace in 9 months in December.

CPI rose 0.6% in December on the month, taking the annual rate to 2.9%, up from 1.9% the previous month.

The Bank of England’s Governor, Mervyn King, has warned that inflation could rise sharply over the next few months with many expecting it to exceed the 3% mark.

The minutes said: “The projections and analysis prepared in advance of the February Inflation Report would enable a more comprehensive assessment of the latest information about the supply potential of the economy, as well as the impact of the various headwinds and tailwinds affecting activity and inflation.”

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