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Base rate held at 0.5%

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by Gill Montia
Base rate held at 0.5%

The Bank of England’s Monetary Policy Committee (MPC) has opted to keep the base rate at 0.5% in August, as widely expected.

The rate has remained at its historic low for well over two years and earlier predictions of a rise this autumn lost credibility once UK economic growth slowed to 0.2%, in the second quarter.

According to a recent BBC poll, 26 out of 32 leading economist questioned now believe rates will remain static in 2011, while three are predicting no increase until 2013.

The MPC has also chosen not to act on Quantitative Easing (QE) in August, despite a recent call from business secretary, Vince Cable, for reinstatement of the programme.

The Bank has so far injected £200 billion into the UK economy by buying up bank assets, such as government and corporate bonds, in efforts to ease lending and boost growth.

The scheme was suspended in early 2010 but some analysts claim the timing was premature, with the Centre for Economics and Business Research recommending a further £100 billion of QE, and the Institute of Directors an additional £50 billion.

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News posted: August 4, 2011

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