BoE expected to keep interest rates on hold
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 12th consecutive month.
In addition, the Bank is expected not to inject any more money into the economy through its quantitative easing (QE) scheme.
Last month, the Bank announced it was pausing its QE programme – having already injected £200 billion into the economy to bring it out of recession.
However, the UK’s recovery remains fragile and therefore the Bank has said it is prepared to restart the programme, if necessary.
The Bank of England will announce its decision at 12.00pm today.
Last week, the Office for National Statistics revealed the UK economy grew by 0.3% in the October to December period – slightly higher than the 0.1% estimated in January.
According to Howard Archer at Global Insight: “The odds strongly favour the Monetary Policy Committee keeping the quantitative easing programme on hold, particularly as the latest data suggest that economic activity bounced back in February from a weather-related hit in January.”
In addition, the Bank is unlikely to increase QE as a result of rising inflation. Official figures last month revealed consumer prices rose by 3.5% in January – way above the Government’s target of 2%.
Meanwhile, there has been positive economic data this week. Yesterday, the UK’s closely-watched service sector recovered in February after experiencing a dip in January as a result of bad weather disrupting services, as well as the VAT rise.
The latest activity index from the Chartered Institute of Purchasing and Supply (CIPS)/Markit PMI showed a reading of 58.4 in February, up from 54.5 in January.
Any reading above 50 indicates growth and February‘s figure was well above analysts expectations of 54.9.
Furthermore, the CIPS/Markit manufacturing purchasing managers’ index (PMI) revealed UK manufacturing activity grew faster than expected in February – sustaining the previous month’s 15-year high rate of growth.