blog

MPC votes to keep Interest rates at 0.5%

Written by Sam Jones on 22 December 2011.

as well as maintaining the level of quantitative easing (QE) at £275 billion, following October’s decision to inject a further £75 Billion into the economy. This comes as good news to the mortgage broker and the mortgage market as whole, with a number of best value mortgages entering the market with competitive low interest rates.The Committee agreed that a change in policy was not warranted against the background of continuing weakening in labour market and the magnitude of uncertainties with the international economy. Minutes from the MPC’s December meeting revealed that some committee members thought the outlook for the economy had deteriorated during the month and further money printing would be required in due course.UK economist at Capital Economics, Vicky Redwood said “December’s UK MPC minutes reiterate the committee’s view that there is little point in trying to fine-tune policy, but nonetheless suggest that the door remains open to more QE before too long.”The Bank published its quarterly inflationary report last month, in which it forecast the heightened risk of a double-dip recession and paved the way for another spell of QE. Inflation remains well above the 2% target because of the temporary impact of the VAT increase and higher energy and import prices according to the MPC. However the MPC noted that inflation was likely to fall sharply in the first part of 2012 as the impact of those temporary factors faded.It said “There was greater uncertainty about the pace at which inflation would continue to fall thereafter but the Committee’s central view remained that downward pressure from elevated unemployment are spare capacity would continue to restrain domestically generated inflation.”The Bank of England’s Monetary Policy Committee (MPC) voted unanimously to hold the Bank Base rate at 0.5 per cent as well as maintaining the level of quantitative easing (QE) at £275 billion, following October’s decision to inject a further £75 Billion into the economy. This comes as good news to the mortgage broker and the mortgage market as whole, with a number of best value mortgages entering the market with competitive low interest rates.

The Committee agreed that a change in policy was not warranted against the background of continuing weakening in labour market and the magnitude of uncertainties with the international economy. Minutes from the MPC’s December meeting revealed that some committee members thought the outlook for the economy had deteriorated during the month and further money printing would be required in due course.

UK economist at Capital Economics, Vicky Redwood said “December’s UK MPC minutes reiterate the committee’s view that there is little point in trying to fine-tune policy, but nonetheless suggest that the door remains open to more QE before too long.”

The Bank published its quarterly inflationary report last month, in which it forecast the heightened risk of a double-dip recession and paved the way for another spell of QE. Inflation remains well above the 2% target because of the temporary impact of the VAT increase and higher energy and import prices according to the MPC. However the MPC noted that inflation was likely to fall sharply in the first part of 2012 as the impact of those temporary factors faded.

It said “There was greater uncertainty about the pace at which inflation would continue to fall thereafter but the Committee’s central view remained that downward pressure from elevated unemployment are spare capacity would continue to restrain domestically generated inflation.”

Add comment


Security code
Refresh

Latest News