|    FM Home   |    FM News   |    FM Forum   |    FM Blog   |    20th of February 2018
|   Banking  |   Insurance  |   Property  |   Mortgages  |   Economy  |   Investments  |   Credit Cards  |   Debt  |   Loans  |   Pensions  |   Companies  |  

Economy News feed Economy News

All Financial News feed All Financial News

UK interest rates on hold but central bank announces QE boost

Bookmark and Share

by Kay Mitchell

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%, as widely expected.

Interest rates have now been at this low level since March 2009 – when the economy was in the midst of recession.

Recent figures show the economy appears to be faltering so it was understood that the central bank is reluctant at this stage to lift interest rates as the recovery is losing momentum.

Some economists believe the bank will not lift rates again until 2013.

The move comes despite stubbornly high inflation – which is currently running at more than double the 2% target and it is forecast to reach 5% later this year.

However, the Bank has announced it will restart its quantitative easing (QE) scheme – a move which was widely expected after the Office for National Statistics (ONS) yesterday revealed the UK economy grew by 0.1% in the second quarter – slightly less than a previous estimate of 0.2%.

Furthermore, the ONS revised down growth in the first quarter from 0.5% to 0.4%.

A recent slew of weak economic data had led to speculation that the central bank would embark on its “QE2” programme to boost the economy.

The Bank today said it will pump a further £75 billion via its QE scheme after injecting £200 billion into the economy in November 2009.

QE, also known as printing money, is a process used for buying Government bonds or other financial assets.

Many leading business groups and economists have been calling on the Bank of England to restart the scheme but former MPC member, Andrew Sentance, said the scheme will not stimulate growth.

Prior to today’s decision, he told Sky News: “The MPC needs to hold its nerve here and show the value of having an independent central bank that balances both these worries about (economic) growth but also takes into account the genuine concerns about inflation, which is creeping up.”

Several other economists had thought the Bank may be reluctant to re-introduce its QE programme with inflation running so high.

Furthermore, it is not evident whether purchasing Government bonds would be successful as yields on most securities are hovering at all-time lows.

However, some have suggested that QE may be the only option to help “prop the economy up.”

Details of how the Committee voted today will be published on 19 October.

Discuss this in the Finance Markets forums

Story link: UK interest rates on hold but central bank announces QE boost

News posted: October 6, 2011

Financial Services:

Related financial stories to: UK interest rates on hold but central bank announces QE boost:
Previous: «
Next: »

Visited 30 times, 1 so far today

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

Tags: , , , , , , , ,