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Base rate frozen at 0.5 per cent

Base rate frozen at 0.5 per cent

Category: Economy

Updated: 09/07/2009
First Published: 09/07/2009

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 It is now over 6 months old so the content may be out of date.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 Monetary Policy Committee (MPC) has voted to maintain the base rate of interest at 0.5 per cent for the fourth consecutive month, the Bank of England has announced.

The decision was widely predicted and means the rate has been at a historic low since it was changed in March. It has dropped rapidly since October, when the measure was set at five per cent.

It was also announced that the Bank's Quantitative Easing (QE) programme, which received a £50 billion boost two months ago, will continue, although it is to be reviewed at the August meeting alongside inflation projections.

"The MPC's decision today to leave bank rate unchanged for another month was really the only possible conclusion and the committee probably spent more time discussing the QE programme than whether to change bank rate," said Ray Boulger of John Charcol.

"With the £125 billion already committed to QE by the MPC due to be spent by the end of this month but bank lending, especially for mortgages, still woefully inadequate, agreeing to utilise the final £25 billion approved by the Treasury was probably not an difficult decision."

The low base rate has meant that many homeowners on tracker mortgages have seen their interest repayments all but vanish, while savers have seen the rate of return on their money contract markedly.

Ben Thompson, director of mortgages at Legal & General, said that higher than expected inflation figures meant the MPC may have to increase the rate before the end of next year.

"Throughout 2010 the challenge for the MPC will shift towards combating inflation whilst not going so far as to choke any recovery," he added.

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