Rates held at 0.5%, BoE confirms - Economy - News - Moneyfacts


Rates held at 0.5%, BoE confirms

Rates held at 0.5%, BoE confirms

Category: Economy

Updated: 08/09/2011
First Published: 08/09/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Bank of England has confirmed that it has frozen interest rates at 0.5% once again.

The announcement follows the monthly meeting of the Bank's rate setters, known as the Monetary Policy Committee (MPC).

A decision to keep the Bank rate at the current historical low was widely predicted.

Recent economic data suggests the recovery in the UK economy is not as strong as was thought.

On Monday, it was reported that the domestic services sector saw activity fall by its steepest margin in more than a decade in August.

The marked fall was blamed on a decline in new orders and uncertainty over the state of the economy, while some respondents cited the rioting that took place across the UK as a catalyst for a drop in activity.
Senior economist at Markit, Paul Smith, said the drop in the headline index was the worst since the foot-and-mouth crisis of 2001.

The Bank of England would be loath to increase rates while the recovery hangs in the balance, and it now seems that any rise will not come until 2012 at the earliest.

Indeed, in August all members of the MPC were in agreement that rates should be frozen, as opposed to previous months when as many as three rate setters have voted to increase rates.

The Bank will reveal how the MPC voted later this month.

It was also announced that the Bank has decided not to increase the size of its programme of quantitative easing (QE) this month.

However, The National Institute of Economic and Social Research (NIESR) has said that a further round of quantitative easing is probable if weakness in the UK economy persists over the coming months.

It estimated that GDP increased by 0.2% in the three months ending in August, after growth of 0.6% in the three months ending in July.

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