The Bank of England today announced that they have decided to keep the base interest rate at the record low of 0.5%, which in has been at since March 2009.
This was widely expected. However the quantitative easing (QE) measures have just come to an end and they have decided NOT to extend the stimulus programme.
This programme has injected £375bn into the UK financial system and with the economy still uncertain, poor economic indicators and poor corporate results, there was speculation that it may be further extended.
However recent figures have shown that the UK has come out of recession, growing 1% between July and September.
The initial view is that the Bank is likely to want to wait to see if the economy continues on this current trend of better figures and shows signs of coming out for good. Yet signs from the last MPC meeting show some views that further QE would be needed.
“We are pretty sure that the economy will need more stimulus in the months ahead,”
“And we do not think that the committee is out of firepower yet.”
Vicky Redwood of Capital Economics.
However there are also concerns that the effect or more QE into the system will have a very watered down impact and indeed may do little of what has been seen from the original amounts pumped in.
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