BoE will not make a move on interest rates

| December 7, 2010 | 0 Comments

According to economists, the Bank of England is widely expected to keep interest rates on hold for the medium-term.

The Monetary Policy Committee (MPC) will start its two-day meeting tomorrow and rates are expected to be kept at the historic low of 0.5% - where they have been since March 2009.

In addition, analysts expect no movement on the quantitative easing (QE) scheme this month.

Better-than-expected economic growth in the third quarter and a rise in manufacturing activity are likely to reinforce the view that the Bank will leave QE on hold for now.

However, last month’s minutes revealed the MPC were split three ways – for the second consecutive month.

Adam Posen, again, called for an injection of £50 billion via the Bank’s QE programme to boost the economy.

Furthermore, for the sixth consecutive month, policymaker Andrew Sentance voted for interest rates to be lifted from their current historic low of 0.5% to combat stubbornly high inflation.

According to IHS Global Insight analyst Howard Archer: “The Bank of England is poised to end 2010 without giving any presents to the economy in the form of more quantitative easing (QE) but also not acting like Scrooge by putting interest rates up.”

Meanwhile, Philip Shaw, an economist at Investec banking group, believes the prospect of more QE cannot be ruled out, particularly if the Bank “became seriously concerned that the recovery was running aground.”

The Bank of England will announce its decision on interest rates and QE on Thursday at 12:00pm.

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