Interest rates on hold and no additional Quantitative Easing

Posted on August 2nd, 2012 | Categories - News

The Bank of England’s Monetary Policy Committee (MPC) has voted to leave interest rates on hold at 0.5%.

Some analysts had suggested that the MPC may decide to reduce rates even further, but such a move did not materialise.

The MPC also resisted the temptation to extend the program of Quantitative Easing (QE), which now stands at £375 billion, having been extended by £50 billion last month.

Further QE had been predicted by some on the back of poor GDP numbers which has seen the UK economy move deeper into recession.

Winners

The winners from today’s announcement include homeowners who have Tracker mortgages where the interest rate is linked to Bank Base rate.

People looking to retire soon and buy an Annuity will also breathe a small sign of relief as additional QE could have seen gilt yields, and therefore Annuity rates, fall further.

Any pension calculator will show how far Annuity rates have fallen over the past year, a further drop resulting from additional QE would have been far from welcomed by this beleaguered group.

Losers

Despite the rate of inflation dropping back over recent months, savers are still struggling to find an attractive rate of return with even the best buy savings accounts only just providing a real return above inflation.

Today’s announcement will do nothing to help improve the situation for savers.