No increase in base rate again

For the ninth month in a row the Bank of England has decided to keep the base interest rate on hold, leaving it static at its lowest level in history, which is just 0.5 percent. The decision to keep the base rate so low has come as no surprise to most industry experts given the ongoing problems facing the economy and further threats of job losses. The announcement was made following the December Monetary Policy Committee meeting, which was held last week.

The Bank of England also announced that it would continue with its quantitative easing program to try and revive the economy, having announced last month that the plan was being extended to a total of £200 billion, reflecting an extension of a further £25 billion. Originally the maximum amount earmarked for quantitative easing had been £150 billion. No clue was given as to whether the scheme would be extended further next year.

Many industry experts have slated the quantitative easing programme, stating that it is clear that the plan is not having the desired effect on the economy but the government is continuing to use the programme to try and ease the economic problems. It is thought that when the current programme runs out in January the government will announce whether it plans to extend the scheme further.

In the meantime, an economist from Global Insight, Howard Archer, said that it was likely that the Bank of England would keep the base rate on hold at 0.5 percent until late next year, and even predicted that it could be 2011 before the base rate was increased. He said that fears over unsustainable recovery meant that it was far too soon for the government to think of policy tightening.

Tags: interest rates, quantitative easing, economist, Monetary policy, inflation, The Bank of England, Howard Archer, base rate, Global Insight Inc