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Interest rates held at 0.5% for 30th month; QE stays at £200bn

by: ifaonline
  • 08/09/2011
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Interest rates held at 0.5% for 30th month; QE stays at £200bn
The Bank of England has kept interest rates at their record low level of 0.5% following the latest meeting of the Monetary Policy Committee (MPC).

It has also decided to maintain the quantitative easing programme at £200bn, despite growing calls for an increase.

The Bank’s decision on the base rate was widely expected by economists and extends its record spell at the historic low level, where it has been since March 2009.

The Institute of Directors yesterday called on the Bank to extend its current £200bn quantitative easing program by £50bn, suggesting it was needed to prevent the economy from slipping into recession.

Graeme Leach, the organisation’s chief economist, said: “The time to launch QE2 has arrived. The downside economic risks are sufficiently great to warrant an extension in quantitative easing now, in order to avoid the risk of a double-dip recession.”

The minutes of the MPC’s August meeting showed its members were unanimous in voting to keep the base rate at 0.5%, while just one member, Adam Posen, wanted to see further quantitative easing.

Ben Thompson, managing director, Legal & General Mortgage Club, said: “Another pretty straightforward decision this month however there will no doubt have been much to discuss.

“The Bank hasn’t quite played all its cards in terms of stimulus for the economy and could still launch another round of QE, however the jury is out in terms of the benefit of doing this unless absolutely necessary.

“We expect rates to remain unchanged for a long time with QE kept under constant review and this will be tremendous news for borrowers but quite the opposite for savers, many of whom have had to dig deep into their savings to boost their income and cover costs.”

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