Bank holds rates at record low
Thursday 12 January 2012
Related articles
The Bank of England held fire on further emergency measures for the UK economy today, despite another dose of worrying news from the manufacturing sector.
Interest rates were kept at a record low of 0.5% while the Bank's quantitative easing (QE) programme remained at £275 billion following the increase of £75 billion in October.
The no-change decision came despite a call from the British Chambers of Commerce to increase its support with a £50 billion top-up to QE, following October's shock increase.
But the Bank opted not to move yet as it waits for a clearer picture of how the economy fared in the final quarter of 2011 following mixed recent data.
Fears intensified today that the economy might have slipped into reverse in the fourth quarter of 2011, after Office for National Statistics figures revealed industrial production declined by 0.6% in November, following a 1% fall in October.
Manufacturing output fell 0.2% in November although its decline was at a lower rate than the previous month.
There have also been recent signs that the economy improved slightly in December, with industry surveys coming in stronger than expected.
Growth in the powerhouse services sector, which makes up 75% of the UK economy, is likely to have saved the wider economy from contraction in the final quarter, while surveys reported growth in manufacturing and construction.
But the crisis in the eurozone - which the Bank cited as one of the key threats to UK recovery - continues to rumble on as EU leaders are yet to deliver a concrete plan to resolve the region's problems.
Economists still expect a further £50 billion of QE from the Bank of England in both the first and second quarters of this year, taking the total up to £375 billion.
The minutes from the monetary policy committee's (MPC) last meeting in December suggested a further cash injection to boost the economy was highly probable but not until February at the earliest, as the committee has yet to complete the latest round of QE.
Ian McCafferty, chief economic adviser at business body CBI, said: "Today's decision by the MPC to leave monetary policy unchanged was expected, since the current round of asset purchases is not yet complete.
"But with economic conditions fragile and inflation expected to undershoot, the MPC appears to be signalling that a further extension of the asset purchase programme is likely in the months ahead."
Holding interest rates at 0.5% will be welcomed by borrowers, but the extended period of lower lending costs spells more misery for pensioners and savers, who will continue to suffer low returns on their money at a time when inflation is eroding the value of their deposits.
PA
- 1 Massive stage collapse before Radiohead concert kills one
- 2 News in pictures
- 3 Leveson threatened to quit after public attack by Gove
- 4 In pictures: The bewildering face of China
- 5 Osborne: The people’s damning verdict
- 6 Ed Miliband: 'Cameron is the last gasp of the old guard'
- 7 Savers start a 'jog' on Europe's banks as Greece votes
- 8 For whom the bell tolls: £20m 'Memo' project takes shape on Dorset's Jurassic coast
- 9 Still standing: George Galloway reveals why his staunchly Leftist outlook is still invariably right
- 10 Aung San Suu Kyi: A lesson in the value of kindness
- 1 Massive stage collapse before Radiohead concert kills one
- 2 Patrick Cockburn: Greece's day of reckoning dawns in a climate of anger and uncertainty
- 3 The Blagger's Guide To: The best (and worst) fathers
- 4 We just click: How Lego keeps building on its success
- 5 Revealed: Harry Potter is the Antichrist!
- 6 The Leveson Inquiry: We're in this together!
- 7 Osborne: The people’s damning verdict
- 8 David Flatman: Over and out
- 9 Frank Zimmerman and me: The truth about the troll who tormented Louise Mensch
- 10 Aung San Suu Kyi: A lesson in the value of kindness

Experience the Heineken Hub
Get free wi-fi and exclusive i content while you enjoy a tasty pint of Heineken at participating pubs.

Win a sumptuous three-night stay in Austria
Get away from it all in the fresh mountain air at the four-star Hotel Edelweiss & Gurgl.

Win a five-star foodie weekend to Liège
Spend two nights in gourmet heaven at a top hotel in the capital of French-speaking Belgium.

A home to be proud of with Halifax
Download the Halifax's brilliant, free new Home Finder app, and take all the pain out of finding your dream home

Playing a game-changing role during the Games
Cisco is providing the solutions for London 2012's complex IT needs.

Enter the latest Independent competitions
Win anything from gadgets to five-star holidays on our competitions and offers page.

Business videos from commercial thought leaders
Watch the best in the business world give their insights into the world of business.
Career Services
Day In a Page

Still standing: George Galloway

Daniel Radcliffe as drug-taking Beatnik poet

Objets czar: David Usborne’s collection of myriad objects

World's richest woman: Gina Rinehart

Comments