Interest rates to remain at historic 0.5 per cent low

Posted on September 10th, 2010 | Categories - News

Interest rates are to remain at 0.5 per cent for the 18th month in a row after the Monetary Policy Committee (MPC) decided to leave the rates unchanged.

Experts had predicted that the MPC would decide to keep rates at the historically low figure, first set in March 2009, as well as continue with the Bank of England’s £200 billion quantitative easing (QE) programme but some are calling for an increase to curb inflation.

Chief economist at the Institute of Directors Graeme Leach said: “The Bank of England has held fire for another month, but we think the quantitative easing gun is about to be reloaded and the order to shoot given”.

He warned that “whilst above target inflation has stopped the MPC pulling the trigger on a further extension in QE this month, the economic threat from weak money supply growth looms ever larger”.

Lai Wah Co, head of economic analysis at CBI, said: “In recent weeks there has been more talk about the need to expand monetary policy, amid concerns about how quickly growth momentum will fade in the coming quarters at home and abroad. However, economic indicators still suggest the UK recovery is on track, although we expect it to be bumpy and slow”.

The MPC decision marks the longest spell of a British fixed low interest rate since the Bank of England was made responsible for setting monetary policy 13 years ago.