BoE keeps interest rates on hold and halts QE
The Bank of England’s Monetary Policy Committee (MPC) has today elected to keep UK interest rates on hold at the historically low level of 0.5% for the eleventh month in a row.
In addition, it has put the brakes on its quantitative easing (QE) scheme – introduced to stimulate growth within the economy.
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
Both moves were widely expected by analysts.
However, the decision to keep interest rates at the low level comes despite recent figures showing UK inflation rose in December by 2.9% – its fastest annual pace for nine months – and above the Bank’s target of 2%.
Last month, the Bank’s Bank Governor, Mervyn King, warned inflation was “likely to rise to over 3% for a while”. However, he added that it “should return to target in the medium term”.
Furthermore, official figures last month revealed that the UK economy grew by just 0.1% between the October and December period, suggesting that the economy had finally emerged from its worst recession since records began in 1955.
However, the figures disappointed economists who had expected that the economy would grow by around 0.4%.
As a result of inflation and GDP figures, the majority of analysts expect rates to stay at 0.5% until at least the latter half of this year.
In related news today, the Halifax revealed a 0.6% rise in house prices for the month of January compared with December.
The latest price gain takes the annual increase to 3.6% with the average UK home costing £169,777.
According to the Halifax, which is now owned by the Lloyds Banking Group, it was the seventh consecutive month that property prices have risen.
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