Interest rates stay the same for eighth month

For the eighth month in a row the base interest rate has remained at its all time low of 0.5 percent. The announcement was made following the monthly Monetary Policy Committee earlier this week.

In addition to keeping the base interest rate on hold again, at the lowest level it has ever been in the history of the Bank of England, the central bank also announced that it has once again extended the quantitative easing scheme to try and help revive the economy.

Originally the central bank had announced that £150 billion in total would be put aside for quantitative easing, but even before this meeting that amount had been exceeded by £25 billion.

The decision to plough a further £25 billion into the economy through quantitative easing now brings that total amount to £200 billion, with the government hoping that this latest extension will help to revive the economy.

The decision was made following figures that showed the UK will still in recession, after reports showed that economic output had shrunk again in the third quarter even though many industry experts had been expecting an announcement that the UK was officially out of recession.

The £25 billion will be spent over the next three months, whereas in the past three months £50 billion has been spent.

One industry expert said: “It would be interesting to learn why the committee has gone for a smaller expansion of asset purchases than previously. That might reflect some concerns over the medium-term inflation background or a big split on the committee.”

Mervyn King, the governor of the Bank of England, had to ask Alistair Darling if he could allocate the extra funding. He wrote: “Households have reduced their spending substantially and business investment has fallen especially sharply. A number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident.”

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