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Wednesday 16th of June 2010
June 10, 2010    

BoE keeps interest rates on hold

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by Kay Murchie

The Bank of England’s (BoE) Monetary Policy Committee (MPC) has today elected to keep UK interest rates on hold at the historically low level of 0.5% for the 15th consecutive month, as widely expected.

Furthermore, the Bank opted not to inject any more funds into the economy via its quantitative easing (QE) scheme – introduced to stimulate growth within the economy.

In February, the Bank announced it was pausing its QE programme – having already injected £200 billion into the economy to bring it out of recession.

The move to hold interest rates comes despite rising inflation. The CPI inflation rate is a benchmark for the Bank of England’s MPC.

The latest official data shows that British annual inflation reached a 17-month high in April.

However, Mervyn King, Governor of the Bank of England has previously dismissed fears that soaring inflation would demand a significant rise in interest rates in the months ahead.

Meanwhile, new chancellor George Osborne has outlined plans to slash the country’s budget deficit, which currently stands at 11% of GDP.

Further spending cuts and tax hikes are expected in his emergency budget on 22 June - which are set to have a major impact on both economic growth and inflation.

The UK economy grew by just 0.3% in the first quarter of the year - slightly less than the 0.4% growth reported for the final quarter of 2010 - and weaker than the BoE had initially anticipated.

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