Interest rates being kept static for fourth month
July 23, 2009
This month has seen the Bank of England announce that for the fourth month in a row the base interest rate is being kept on hold, at its all time low level of 0.5 percent.
The base rate has been falling steadily between October of last year and April of this year, falling to a tenth of its October level of 5 percent in October to just 0.5 percent in April.
However, since this time it has remained static at 0.5 percent, and this has not come as any surprise to most industry experts.
Whilst some industry experts have said that there is a chance that once the economy starts to come out of recession interest rates could go back up as quickly as they went down one industry official said that it was unlikely that there would be any further interest rate movement until the middle of next year.
She said: “It can barely go lower and… an increase at this stage is out of the question.”
As well as announcing the decision to keep the base rate on hold the bank of England also stated that it had no plans to extend the quantitative easing programme, which has seen £125 billion being ploughed into the economy through the purchase of government and corporate bonds.
In total up to £150 billion was earmarked for this, but officials think that the central bank is holding off extending the scheme further until it has determined what effect the process has already had on the economy.
The British Chambers of Commerce did not agree with this decision by the Bank of England, and one official from the BCC said: “Quantitative easing is not yet fully effective and there is a strong case for raising the proportion of private sector assets that the MPC purchases. It is important to significantly increase the programme’s size, so as to underpin business confidence.”
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