MPC holds base rate at 0.5%
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The Monetary Policy Committee has held Bank of England interest rates at 0.5 per cent.
Today’s decision, postponed from May 6 due to the general election, means base rate has now been held at its all-time low for 14 months.
The MPC has also decided to hold its quantitative easing programme at its current level of £200bn.
RBS head of group economics Stephen Boyle says: “Current political uncertainties make little difference to monetary policy, for now at least. There is insufficient demand in the economy to put pressure on prices and the recovery needs time to fully take hold. Consequently we don’t expect to see the MPC raising rates anytime soon.”
Barclays Capital analyst Simon Hayes says the Bank released no material statement with this decision, which he says is unusual: “This presumably reflects a reluctance by the MPC to articulate anything that might have the unintended consequence of bearing on the ongoing negotiations to form a new government, or add to the surrounding financial market volatility.”
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Readers' comments (1)
Michael White emailmortgages | 10 May 2010 2:37 pm
A 'definite maybe'? What else 'definite' can you say in the present economic environment?
Demand in the economy, as defined by Stephen Boyle, would be of little consequence if the markets lost faith in a coalition government's fiscal approach.
In short, unless over the coming weeks it becomes clear that a UK government can be formed that will deal convincingly with the country’s economic problems, I believe the bond market and the forex market will, unsurprisingly, give a thumbs down to the UK……
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