uly 29 (Reuters) – British finance minister George Osborne on Thursday said there was no tacit agreement with the Bank of England’s governor Mervyn King on keeping interest rates low. (Reporting by Sumeet Desai)
Interest rate is held at record low
April 9, 2009 By Leave a Comment
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The decision to hold rates and keep the pace of QE unchanged has reflected the difficulty of judging the impact of the measures just a month into the process – although Bank of England Governor Mervyn King told MPs two weeks ago that he was “mildly encouraged” by results. Skip related content
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The Bank of England has left interest rates unchanged
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The Bank’s latest credit conditions survey, however, showed lenders indicating they would make more credit available to individuals and businesses in the coming three months.
Other factors weighed up by the MPC in their two-day meeting would have included February’s surprise rise in inflation, although this was put down to the weakness of sterling sending up import prices and is likely to be a blip.
The Consumer Prices Index – which currently stands at 3.2% – is set to fall well below the Bank’s 2% target later this year as recession bears down on demand and prices. Although experts predict a fall in output during the first three months of 2009 of the same order as the 1.6% fall seen in the final quarter of 2008, surveys from manufacturing, services and construction firms have signalled that the break-neck pace of the UK’s slump into recession is at least slackening off.
The Bank of England has held interest rates unchanged at their record low of 0.5%. The decision comes after six months of cuts from the Monetary Policy Committee (MPC) to tackle a worsening recession.
Rate-setters are now pinning hopes on an unprecedented £75 billion programme of quantitative easing (QE) – effectively printing money – to ease credit conditions. The MPC launched the strategy last month and has bought up almost £26.5 billion in Government and corporate debt so far under a three-month programme.
The committee is monitoring the impact of QE on the wider economy every month but announced no changes to the scale of the operation. The decision to hold rates and keep the pace of QE unchanged reflects the difficulty of judging the impact of the measures just a month into the process – although Bank of England Governor Mervyn King told MPs two weeks ago that he was “mildly encouraged” by results so far.
The Bank’s latest credit conditions survey, however, showed lenders indicating they would make more credit available to individuals and businesses in the coming three months. Other factors weighed up by the MPC would have included a surprise rise in inflation during February, although this was put down to the weakness of sterling sending up import prices and is likely to be a blip.
The Consumer Prices Index – which currently stands at 3.2% – is set to fall well below the Bank’s 2% target later this year as recession bears down on demand and prices.
Although experts predict a fall in output during the first three months of 2009 of the same order as the 1.6% fall seen in the final quarter of 2008, surveys from manufacturing, services and construction firms have signalled that the break-neck pace of the UK’s slump into recession is at least slackening off.