The Bank of England’s Monetary Policy Committee (MPC) has held base rate at 0.5% for the nineteenth month in a row and has also held its quantitative easing 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 asset purchases financed by the issuance of central bank reserves 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.
Andrew Sentance, MPC member, has called for a 0.25% increase in base rate for the past three meetings while fellow MPC member Andrew Posen last month told the Hull and Humber Chamber of Commerce the Bank of England should instigate a second round of quantitative easing to avoid making low growth the norm. The minutes of this month’s meeting will be published at 9.30am on Wednesday October 20. (article continues below)
Jeremy Cook, chief economist at World First, says: “It was unlikely that we would see a change in policy from the MPC this month for two reasons. Primarily, I believe that they will wait on details of the upcoming quarterly inflation report due in early November so as to ascertain and balance the inflationary risks that a further liquidity injection would cause.
“Inflation is already well above the MPC’s 2% target and has proved sticky throughout the entire financial crisis causing one member of the MPC, Andrew Sentance, to vote for increased interest rates. I reckon he will vote similarly this month but will be the only one in the ’hawk’ camp.
“The second reason is that it gives the MPC one more Federal Reserve meeting to see what the US will do. It is now more than likely that we will see additional monetary stimulus in the US next month, a factor that could sway the MPC to reciprocate at their own November meeting.”