Base rates still on hold at 0.5pc

Nia Williams

April 4, 2013

The decision means interest rates have stood at the record-low level for more than four years.

The Bank also announced that it will keep its quantitative easing programme on hold despite pressure from some quarters to revisit it.

For two consecutive months three members of the MPC, including Mervyn King, have voted for further QE but were outvoted. Some had thought this may change this month following disappointing data on the UK economy and George Osborne’s budget.

Barry Naisbitt, chief economist at Santander UK, said: “The decision to hold Bank Rate was widely expected.

“However, after the split votes on the Monetary Policy Committee in the past two months, the decision on whether to undertake further quantitative easing this month again looked finely balanced.

“The uncertainty about the underlying pace of economic activity remains, with the latest survey-based activity indicators showing continued weakness in the manufacturing and construction sectors. In addition, the February Inflation Report showed that inflation was expected to remain above its 2% target for the next couple of years, so households’ real earnings are expected to continue to be squeezed.

“Although the MPC did not vote to extend QE today it is clearly possible that more QE could be announced in the coming months to boost economic activity.”

Ben Thompson, managing director of Legal & General Mortgage Club, agrees that that move was widely expected. He said: “Recently we have seen major announcements designed to stimulate the housing market in the shape of FLS and ‘Help to Buy.’

“Debate continues as to how effective they will turn out to be but they seem set to provide a positive impact as the year progresses. Therefore, it’s unsurprising in this environment of record low interest rates and set against a context of Government trying to help borrowers that the MPC has opted to keep the base rate unchanged.”

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