Despite speculation that the Bank of England’s Monetary Policy Committee might have considered cutting interest rates, or indeed extend the existing programme of Quantitative Easing (QE), no changes to either were announced when the MPC’s decision was revealed at noon today.
Bank base rate has now been on hold at 0.5% for over four years and with a change in Governor imminent, it seems the members of the MPC are not keen to make any significant changes, before Mark Carney takes up his post in July.
Despite split votes at previous meetings, the MPC also decided, perhaps on the back of more positive economic data, predictions the economy will avoid a triple dip recession and lingering fears about inflation, not to increase the existing £375 billion program of QE, which is designed to stimulate the economy.
The announcement from the Bank of England came on the same day the Bank of Japan announced a huge package of measures, including a 50 trillion Yen increase to their own package of QE measures; equivalent to £350 billion per year.
Elsewhere the European Central Bank voted to keep rates on hold, for the ninth month in a row, at 0.75%.
In a move designed to give the Bank of England more flexibility to stimulate the economy, the Chancellor, George Osborne, changed the Bank’s remit in his Budget delivered last month. Prior to the Budget the Bank’s remit was simply to control inflation and keep it at a target of 2%, now however the Bank is also expected to promote growth in the economy.
It appears that the MPC has decided against using its new powers immediately and is in something of a holding pattern until Mark Carney takes the helm in the summer.
Winners and losers
Any interest rate decision brings good news for some, whilst others will be disappointed.
Whilst individuals and businesses who have borrowed money, with interest rates linked to the Bank of England’s base rate, will be pleased their costs will not rise, savers will again be left disappointed and having to contend with interest rates continuing below inflation.