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BoE holds base rate and QE

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Written by:
02/08/2012
The Bank of England (BoE) has voted to keep base rate at 0.5% and maintain its quantitative easing programme at £375bn.
BoE holds base rate and QE

The BoE base rate has been on hold for 41 consecutive months.

There had been speculation that the Bank would cut interest rates to 0.25% after the Office for National Statistics (ONS) revealed weak GDP figures for the UK economy last week.

The ONS’ figures showed that the UK economy contracted by 0.7% in the second quarter, far worse than analysts’ expectations of a 0.2% decline.

So far, the MPC has been content to leave rates at 0.5% for more than three years, instead using QE to boost the economy.

Andrew McPhillips, chief economist at Yorkshire Building Society, added: “Despite the poor GDP figures released last week there was always a strong likelihood that the MPC would take no action at this meeting.

“There is still no convincing case to support a Base Rate cut in my opinion and the minutes of the meeting in July indicated that the MPC would wait to see what impact the Funding for Lending Scheme (FLS) has before reconsidering the current stance on a rate cut.

“Unless there are any major negative impacts in the next three months, such as a country leaving the Euro for example, the MPC are likely to wait for the completion of the latest expansion of QE and the introduction of FLS to have an impact before making any further changes to monetary policy.”

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