No change in base interest rate

Following this week’s Monetary Policy Committee meeting the Bank of England has announced that the base interest rate will be kept on hold at just 0.5 percent.

Having been reduced to this level last March this now marks the twelfth month where the base rate has been at its all time low of 0.5 percent. The news will be welcomed by many homeowners who will be relieved that their repayments will not be shooting up.

The central bank has also announced that there are still no further plans to pump any more cash into the economy through the quantitative easing scheme, through which it has already put an additional £200 billion into circulation.

However, this does not mean that the quantitative easing scheme will not be used again in the future should the need arise, but the Bank of England first needs to take stock of the benefits that have been seen by the money pumped in through QE so far.

Economists and industry experts have said that the decision by the Monetary Policy Committee to keep the base rate on hold has come as no surprise, and with the UK economy having only just come out of recession it would have been too high a risk to the UK’s fragile economy to increase the base rate already. Most were also not surprised by the decision not to put anymore cash into the economy through QE for the moment.

The final three months of last year saw the economy grow by 0.3 percent according to reports, although initial estimates had put the growth level at just 0.1 percent. This had raised fears over a double dip recession due to the low level of growth, and officials believe that a base rate increase could have resulted in a severe negative impact on the economy that could have pushed it nearer to sliding back into recession.