No more QE and base rate held at 0.5%

The Bank of England’s Monetary Policy Committee (MPC) has held base rate at 0.5% for the twenty-second month in a row and has also held its quantitative easing (QE) programme at £200 billion.

The previous change in base rate was a cut from 1% to 0.5% on March 5, 2009.

A programme of quantitative easing 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.

Jonathan Cornell, head of communications at First Action Finance, says: “It is getting harder and harder for the MPC to justify not increasing the base rate from its record-low of 0.5%, as despite the government’s austerity measures, inflation is stubbornly rising above its 2% target, a level which seems a distant memory now.

“The MPC will be walking a tightrope trying to keep inflation under control without derailing the economic recovery.” (article continues below)

Barry Naisbitt, the UK chief economist at Santander, says: “With inflation still well above its target, and expected to rise even further in the coming months after the VAT increase, it will be interesting to see if the members have changed their concerns about the economic risks.”