Bank of England continues to hold interest rates at historic low
Bank of England continues to hold interest rates at historic low
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By Darren Estwick. |  |
Thursday, 04, Mar 2010 06:05
By Sarah Garrod.
The Bank of England's monetary policy committee has today announced interest rates will remain at a record low with its quantitative easing programme still on hold.
Interest rates have now been held at 0.5 per cent since last March in a bid by the Bank to encourage people to start spending again and boost the country's economy.
In its announcement on Thursday, the Bank said: "The Bank of England's monetary policy committee today voted to maintain the official bank rate paid on commercial bank reserves at 0.5 per cent. The committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion."
Last month the Bank said it was halting its programme of quantitative easing (QE) through which it pumps money - so far £200 billion - into the economy.
However, the Bank has said that it could extend the QE programme in future if it thought such a move was necessary.
Analysts widely expected the Bank's decision to hold interest rates at 0.5 per cent, and also deemed it unlikely that it would restart QE, in part due to rising inflation.
Kevin Mountford, head of banking at moneysupermarket.com, says the move has affected savers: "There is no doubt that savers have been the biggest losers during the past twelve months, with rates dropping dramatically. This coupled with recent rises in inflations has meant that it is almost impossible to gain a real rate of return on your savings pot.
"Savers really do need to be on their toes in the current market as lenders chop and change their rates. If you want the best rate then you really do need to shop around."
While Howard Archer, chief UK and European economist at IHS Global Insight added: "We expect the Bank of England to keep interest rates down at 0.5 per cent through 2010 given likely persistent concerns about the strength and sustainability of the recovery.
"The economy seems destined to go through many more twists and turns over the coming months.
"Furthermore, when interest rates finally do start to rise, the increases are likely to be gradual and limited due to the need to offset the marked tightening in fiscal policy that will kick in 2011 at the latest. Meanwhile, further quantitative easing remains very possible if the economy falters markedly over the coming months.
"At the very least, we do not expect the Bank of England to reversing quantitative easing until 2011."