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MPC maintains base rate

  • 09/12/2010
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MPC maintains base rate
The Bank of England Monetary Policy Committee (MPC) has voted to maintain base rate at its historic low of 0.5% for the 21st consecutive month.

In addition, it has maintained the quantitative easing programme (QE) at £200bn despite previous speculation that it would be increased to £250bn on the back of double-dip fears. However, such concerns have recently waned.

The MPC has said it does not foresee increasing rates until Q4 2011 or even into 2012.

However, MPC minutes have also shown an increasing split in the opinions of the committee members, with Andrew Sentence repeatedly calling for the interest rate to be increased to 0.75%, while Adam Posen has voted to increase QE by £50bn.

The minutes of the latest MPC meeting will be published on 22 December 2010.

Jonathan Samuels, chief executive of Drawbridge Finance said: “Ongoing uncertainty around the strength of the recovery and real fear of a premature rate hike hitting business and consumers hard is likely to keep rates on hold until at least the summer of 2011.

“Yes, the economy is stronger than it was a year ago but could it remain standing without the prop of a 0.5% base rate?”

He added that current low interest rates will help support house prices: “Prices appear to have entered a kind of limbo. There are too many conflicting variables to send them in one direction or the other.

“The key time for the property market will come when rates eventually rise. It’s crucial that when rates do rise they go up at a pace that will not give the economy and consumers the bends.”

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