Base rate remains unchanged
The Bank of England bank rate has been held at 0.5 per cent for the 27th month in a row and quantitative easing stays at £200bn. The last rate change was on March 5, 2009, when it was reduced from 1 per cent to 0.5 per cent.
On the same day, the Bank of England initiated a £75bn QE programme. The most recent change to the size of the programme, on November 5, 2009, was an increase of £25bn, bringing the total to £200bn.
Minutes from the Monetary Policy Committee’s May meeting show a split over a rate increase, with six voting in favour of keeping it the same and three voting for an increase.
Inflation currently stands at 4.5 per cent, well above the Government’s target of 2 per cent, putting pressure on the BoE to raise interest rates.
Former MPC member Andrew Sentance warned the Bank of England earlier this month that it is in danger of losing its credibility with the UK public due to its failure to tackle soaring inflation.
The Bank remains in the thick of it. On the one hand needing to ensure that a sustainable economic recovery is baked in, on the other hand ensuring it does not lose its credibility as an independent rate setter that is capable of maintaining a controlled and low inflation economy.
It is a tough one that, but the recovery has to come first.