Interest Rates Kept at 0.5%

Bank of England - Interest Rates Kept at 0.5%The Bank of England‘s Monetary Policy Committee has held the base interest rate at 0.5% for a record 18th consecutive month in a row.

With continued concern over the state of the economy amidst sharp cuts in public spending by the new coalition government the decision was welcomed by David Kern, Chief Economist at the British Chambers of Commerce, who commented:

“The MPC made the right decision by leaving interest rates and the quantitative easing programme unchanged this month. However, uncertainty over future interest rate policy is damaging confidence. Businesses cannot properly plan for recovery without clear knowledge that rate rises will be off the agenda for an extended period.”

“Global risks of an economic setback appear to be worsening, so the welcome news that UK GDP strengthened in the second quarter of 2010 must not lead to complacency. While the eurozone’s problems remain unresolved, there are now worrying signs of a slowdown in the US and even in China.”

“The tough deficit-reduction measures announced in the Budget, although necessary, will inevitably increase the threat of a UK economic setback. Given the precarious economic background, it is absolutely vital that the MPC maintains the current low level of interest rates until the second quarter of 2011 at the earliest.”

As far back as October 2009 the Centre for Economics and Business Research (CEBR) predicted that an interest rate rise was unlikely until 2011.

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