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Base rate held at 0.5 per cent

Base rate held at 0.5 per cent

Category: Economy

Updated: 09/04/2009
First Published: 09/04/2009

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 It is now over 6 months old so the content may be out of date.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 Bank of England's Monetary Policy Committee has voted to maintain interest rates at 0.5 per cent and plough on with its policy of quantitative easing.

Six consecutive months of reductions has seen base rate plummet from five per cent in October last year, in an attempt to first ward off, and then help the economy out of, recession.

Consumers have been affected by the cuts in various ways, with many hit by reductions in the amount of interest earned on their savings. Those with tracker mortgages, however, have seen their repayments decline dramatically.

"Whilst savers will be pleased that rates have not been cut any further, this will do nothing to help those who have seen their income they earn on savings diminish sharply in recent months," said Adrian Coles, director-general of the Building Societies Association.

In addition to the base rate freeze, the Bank revealed it is to continue with its £75 billion programme of asset purchases first announced at the beginning of March.

Since its previous meeting, the committee noted that a total of just over £26 billion of asset purchases had been made and that it would take a further two months to complete the programme.

While both moves were widely predicted, questions have been raised by British businesses as to how effective the policy of quantitative easing has proven so far.

"Yields on both gilts and corporate bonds will have to fall much further, before the policy produces a meaningful unblocking of the credit markets," said David Kern, chief economist at the British Chambers of Commerce.

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