Bank of England halts quantitative easing
Bank of England halts quantitative easing
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By Matt Hallam. |  |
Thursday, 04, Feb 2010 03:32
By Sarah Garrod.
The Bank of England announced today it has halted quantitative easing (QE) and held interest rates at 0.5 per cent.
Following the earlier announcement from the Office for National Statistics (ONS) that the UK barely came out of recession in the fourth quarter of 2009, forecasters had predicted the cautious decision from the Bank's monetary policy committee (MPC).
The Bank has so far pumped £200 billion into the economy in the form of quantitative easing and held interest rates at the historically low base rate for 11 consecutive months.
Howard Archer, chief UK and European economist at IHS Global Insight said before today's decision that the February meeting of the MPC would be "challenging", and predicted that there could be a split among the nine MPC members over whether or not to extend quantitative easing.
Speaking today, Mr Archer said: "Inaction today by the Bank of England today is actually a significant policy development.
"It brings at least a temporary halt to the quantitative easing policy that the bank has been following since last March as the last of the £200 billion allocated to the programme has just been exhausted. Meanwhile, keeping interest rates down at the record low level was a stone dead certainty.
"The case for at least temporarily ending quantitative easing was by no means overwhelming and we suspect there could well have been a split vote within the MPC."
While Stuart Law, chief executive of Assetz, added: "Keeping the base rate at 0.5 per cent is of course good news for homeowners and property investors, and was expected. With the Bank of England having confirmed it is not planning to raise rates even in the face of some short term higher inflation it is pretty clear we are in for a sustained period of low rates with a key objective of stoking up the economy once more. This in turn will raise the tax take for the government and help to reduce the national debt.
"It really does look like we are at the beginning of a classic inflationary period where real assets such as property rise in value for a sustained period, assisted by low interest rates and regardless of the majority view of a poor economic outlook."