Interest rates remain on hold after May meeting

After the May Monetary Policy Committee meeting the Bank of England announced that the base interest rate was to be kept on hold at its all time low of 0.5 percent.

The base rate is now just a tenth of what it was seven months ago, when it stood at 5 percent. However, a series of dramatic rate cuts month on month has seen the base rate plummet to the lowest level in the three hundred and fifteen year history of the Bank of England.

The central bank’s announcement that the base rate was to be kept on hols came as no surprise to most industry officials and experts, as most had predicted that with the base rate already at rock bottom the MPC would vote to keep it on hold.

Instead the central bank has said that it intends to continue using quantitative easing to try and boost the economy and get more money into circulation, and that a further £50 billion was to be ploughed into the economy as part of this process.

By pumping a further £50 billion into the economy the government will have used around £125 billion on this process. However, some officials are questioning why more hasn’t been ploughed into the economy given that the government had earmarked up to £150 billion for quantitative easing when the plan was first launched.

One economist said: “It may suggest they’re reassured that the recovery is going to plan.”

In the meantime there are mixed views with regards to how effective this process has been so far, with some people stating that the effects of quantitative easing can already be seen in the housing and mortgage markets, and others stating that so far there has been little impact and that it will take time for improvements to occur.

Tags: Economic policy, money, interest rates, interest rate, base rate