8
Oct
UK interest rates remain on hold
The Bank of England's rate-setting committee has kept UK
interest rates on hold at 0.5% for the seventh successive month, as
widely expected.
The Bank also said it would continue with its programme of
pumping £175bn into the economy, which it said would likely
take another month to complete. Interest rates remain on hold as
data continues to show that any UK economic recovery remains
patchy. Figures out later this month could show that the UK has
exited recession. The Bank added that it would keep the scale of
its programme of expanding the amount of money in the economy, a
policy known as quantitative easing (QE), "under review". Back in
August it announced that the funds in the scheme would be raised to
the current £175bn level from £125bn.
Analysts were in agreement that the key issue was now whether QE
does end next next month, or whether the Bank's Monetary Policy
Committee announces after its October meeting that it will be
extended. "It is as yet early days in gauging the effect of the QE
programme so far, but companies are still facing serious
constraints in their financing, so the Bank must take no risks in
ending the programme prematurely," said CBI chief economic adviser
Ian McCafferty.
Weak industrial output
Many commentators have said that the economy probably expanded
during the July-to-September period, citing rising house prices and
a big rise in car sales - despite the later being helped by the
government's scrappage scheme. However, official figures showed
earlier this month that UK industrial output fell unexpectedly in
August, declining 2.5% from July. This prompted the National
Institute of Economic and Social Research think tank to predict
that the UK economy failed to grow in the third quarter. The
official figures will be released by the Office for National
Statistics on 23 October. The economy contracted 0.6% between April
and June, following a 2.4% decline from January to March.
BBC News. (2009). UK interest rates remain on hold. [Online].
Available from: http://news.bbc.co.uk/1/hi/business/8296525.stm
Accessed 8th October 2009.