UK leaves rates at a record low for the 16th month running

Friday, July 9th 2010 - 05:29 UTC

Full article 8 comments

However there will be not further liquidity injection

The Bank of England has kept UK interest rates on hold at a record low of 0.5% for the 16th consecutive month. The Bank's Monetary Policy Committee (MPC) also decided on Thursday not to inject any more money into the economy under its policy of quantitative easing (QE).

The decision had been expected but calls have been growing for an increase in rates to curb inflation. Separately, a leading think tank warned that the UK recovery faced “headwinds” in the wake of last month's Budget.

The National Institute of Economic and Social Research (Niesr) estimated that the economy grew by 0.7% in the three months to the end of June, marking a slowdown from the 0.9% expansion seen in the three months to May.

Official GDP figures for the second quarter will be released on 23 July.

Last month, MPC member Andrew Sentance voted to raise rates to 0.75%, becoming the first committee member to call for a rise since August 2008. Sentance had argued that a rise was needed to bring down inflation.

The Consumer Prices Index (CPI) hit a 17-month high of 3.7% in April. It fell back to 3.4% in May but remains well above the Bank's 2% target.

The British Chambers of Commerce said it “fully supported” the Bank's decision, while the manufacturers' organisation, the EEF, said the decision was expected and “likely to be maintained in the short term”.

“However, the planned VAT rise will place additional pressure on already elevated inflation expectations and next month's Inflation Report will need to consider the risks of relying on spare capacity in the economy to bring down inflation and expectations,” said Lee Hopley, the EEF's chief economist.

VAT is scheduled to rise from 17.5% to 20% on 4 January, 2011. (BBC).

Categories: Economy, Politics, International.

Tags: Bank of England, interest rate.

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avargas2001
Comment removed by the editor.
Jul 09th, 2010 - 06:44 am 0
harrier61
UK finances not as bad as some might have hoped then?

And gassy is back making inappropriate comments. Does your comment mean that you won't be here for the rest of this month?
Jul 09th, 2010 - 05:12 pm 0
Beef
Avargas

Last time I checked a map of the world the UK is not in Argentina. The UK does help the FIG pay for protection from a bunch of bullies who wish to threaten a small islands nation (as well as Uruguay). The UK provides overseas aid to many countires and the Islands are no exception. If the hydrocarbon industry in the Island reaches fruition then the FIG will meet the full costs of the Island defence budget.

Then perhaps the UK could divert some of the money saved to the slum dwellers in Argentina. They could do with some help as the Argentine government cares little for these unfortunate individuals.
Jul 09th, 2010 - 11:14 pm 0

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