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UK exits recession as interest rates stay on hold

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08/11/2012
The Bank of England has kept interest rates on hold for the 44th consecutive month and refrained from launching a fresh round of quantitative easing (QE) after recent data showed the UK exited recession in the third quarter.

The Bank’s most recent round of QE, announced in July, came to a close this quarter, with total asset purchases having reached £375bn.

Economists had expected further purchases to commence this month but the stronger-than-expected GDP figures released in October saw most of those forecasts scrapped.

The Office for National Statistics announced at the end of last month that UK GDP for the third quarter of 2012 came in at 1% on its initial estimate, putting an end to three consecutive quarters of contraction.

Economists still expect further quantitative easing in the months ahead, however.

“The MPC’s decision to leave policy on hold today would not have been an easy one and the vote could have been quite close,” said Capital Economics’ chief UK economist Vicky Redwood.

“We think that more policy stimulus will be required in the coming months – the question is whether the Committee feels it has the tools to deliver it.”

Sterling set a one-month high against the euro prior to the announcement, the single currency falling to a low of 79.73p, and was largely unmoved on the news.

The next sign of the Bank’s current thinking will come next week, when the BoE’s quarterly inflation report is published on 14 November.

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