Interest rates stay at record low for 18th month Go compare with our comparison table

Interest rates stay at record low for 18th month

09 September 2010 / by Paul Dicken

The Bank of England has kept the bank rate at 0.5 per cent for the 18th consecutive month, in line with predictions.

Appearing to follow the view of the previous month, that economic growth was felt to be slowing and monetary policy balanced the risks posed by inflation, the Bank announced today that the interest rate would remain unchanged.

Commenting on the decision, Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club, said: “Today’s decision was no surprise but it will be interesting to read the minutes in a couple of weeks time to see whether the balance of the debate has changed.”

The Bank of England’s quantative easing programme, purchasing assets financed by central bank reserves, was also maintained at its current level of £200billion.

Goodwin said surveys showing a step down in the pace of the domestic recovery and question marks over the global recovery made it likely that further quantative easing would have been discussed.

“Assuming that the government tightens fiscal policy as planned, we expect Bank Rate to remain at 0.5% for several years,” Goodwin said.

Chief economist at the bank Santander, Barry Naisbitt, said with inflation still above the two per cent target and concerns about weakening growth mean the Monetary Policy Committee vote would have been split.

“The MPC still has its foot down hard on the accelerator pedal and it faces the tricky task of deciding whether it should ease back a little sometime soon or wait to see if it needs to press down even harder,” Naisbitt added.

Duncan Higgins, of exchange trader, Caxton FX, said the committee members may feel that the conditions for further economic stimulus are getting closer, but the low key impact of the current decision meant sterling was unchanged, trading at €1.20 and $1.54.

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