The Bank of England’s Monetary Policy Committee has held base rate at 0.5 per cent for the nineteenth month in a row and has also held its quantitative easing programme at £200bn.
The previous change in base rate was a cut from 1 per cent to 0.5 per cent on March 5, 2009.
A programme of asset purchases financed by the issuance of central bank reserves was initiated on March 5, 2009. The most recent change in the size of that programme was an increase of £25 billion to a total of £200 billion on November 5, 2009.
MPC member Andrew Sentance has called for a 0.25 per cent increase in base rate for the past three meetings while fellow MPC member Andrew Posen last month told the Hull and Humber Chamber of Commerce the Bank of England should instigate a second round of quantitative easing to avoid making low growth the norm. The minutes of this month’s meeting will be published at 9.30am on Wednesday October 20.
World First chief economist Jeremy Cook says: “It was unlikely that we would see a change in policy from the MPC this month for two reasons. Primarily, I believe that they will wait on details of the upcoming quarterly inflation report due in early November so as to ascertain and balance the inflationary risks that a further liquidity injection would cause.
“Inflation is already well above the MPC’s 2 per cent target and has proved sticky throughout the entire financial crisis causing one member of the MPC, Andrew Sentance, to vote for increased interest rates. I reckon he will vote similarly this month but will be the only one in the ’hawk’ camp.
“The second reason is that it gives the MPC one more Federal Reserve meeting to see what the US will do. It is now more than likely that we will see additional monetary stimulus in the US next month, a factor that could sway the MPC to reciprocate at their own November meeting.”