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Sunday 08th of May 2011
May 5, 2011    

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 has voted to maintain the base rate at 0.5% in May, as widely expected.

The Bank’s quantitative easing (asset purchase) programme will also be maintained at its current level of £200 billion.

The base rate has remained unchanged since March 2009, despite inflation running at 4%, double the Government’s 2% target.

However, the Governor of the Bank of England, Mervyn King, warned earlier this week that “massive” economic challenges faced by high levels of debt would only be worsened by rate hikes.

In addition research published by Deliotte in the last few days included a warning from the firm’s chief economic adviser, the well-respected Roger Bootle, that attempts to reduce inflation by raising rates, even by a fraction, could prove “disastrous” because of high levels of debt and the current state of the UK housing market.

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