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Wednesday 10th of March 2010
March 4, 2010    

BoE keeps interest rates and QE on hold

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by Kay Murchie

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 12th consecutive month.

In addition, it has opted not to inject any more funds into the economy via its quantitative easing (QE) scheme - introduced to stimulate growth within the economy.

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.

Both moves were expected by analysts.

However, the UK’s recovery remains fragile and therefore the Bank has said it is prepared to restart the programme, if necessary.

However, the decision to keep interest rates at the low level comes despite recent figures showing UK inflation rose by 3.5% in January - way above the Government’s target of 2%.

In addition, the Bank is unlikely to increase QE as a result of rising inflation.

In the meantime, the Office for National Statistics recently revealed the UK economy grew by 0.3% in the October to December period - slightly higher than the 0.1% estimated in January.

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 1.5% fall in house prices for the month of February compared with January.

On an annual basis, house prices are still 4.5% higher than a year ago, while the average UK home costs £166,587.

According to the Halifax, which is now owned by the Lloyds Banking Group, it was the first monthly fall since June.

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