Member Article

Bank of England holds interest rates at 0.5%

The Bank of England will hold interest rates at a historical low of 0.5%, as economic recovery expectations are signalled.

Decisions to maintain the quantitative easing programme at £375bn were announced by the bank’s monetary policy committee, after QE was increased by £50bn in July.

Plans to sustain the lowest ever interest rate have been set to last for three years, while today’s OECD forecast predicted a 0.7% fall in the economy.

Assets bought in July are expected to take another two months to complete, the Bank of England stated it would continue to purchase private sector assets on behalf of the treasury.

Brian Murphy, head of lending at leading broker Mortgage Advice Bureau, said: “It’s no surprise the base rate has been held again.

“There are a number of economic factors currently in play aimed at boosting growth, and the MPC needs to see what impact they have before making a major decision over the base rate.

“It is still waiting to see what effect the latest round of QE has, and we also have today’s announcement from the Government which details measures to slash unnecessary red tape across the planning system.

“A cut would benefit borrowers with mortgages linked to the base rate, but would hurt lenders – especially those in the mutual sector who are more reliant on savers and who have been doing their best to maintain the relative ‘health’ of the housing market.”

Anna Leach, CBI Head of Economic Analysis, said: “As the Bank of England is only halfway through its latest round of asset purchases, there was little expectation of any change in policy this month.

“But with underlying conditions relatively flat, and more uncertainty around the euro area expected in the autumn, additional QE remains on the agenda. The Bank’s latest Inflation Report suggests we would need only a relatively small deterioration in economic conditions to prompt a further extension of the asset purchase programme later this year.”

This was posted in Bdaily's Members' News section by Miranda Dobson .