Bank of England holds interest rates, freezes QE
The vote by the Monetary Policy Committee (MPC) of the Bank marks the fourth year of ultra-low interest rates, which is good news for mortgage borrowers, though less positive for savers and pensioners.
A number of commentators believe that the UK Bank Base Rate is likely to be kept at 0.5% until 2017.
The decision not to pump more money into the QE bond-buying programme suggests that outgoing BoE governor Mervyn King may have been outvoted again. At the February MPC meeting, King and two others voted to increase QE by £25bn to £400bn.
More than 40% of economists were expecting QE to be extended, hoping for a fresh stimulus to economy. But some MPC members feel that QE is not working and want more time to assess the impact of the Funding for Lending scheme before approving another cash injection.
Ben Thompson, managing director of Legal & General Mortgage Club, said: “Nearly 320 years ago, it took the princely sum of £1.2 million to effectively establish the Bank of England. This was done in the form of a loan to the Government at the time. Over the last 6 years alone, significant money has been spent on first propping up and then stimulating the UK economy – in fact more pounds have been spent on keeping the UK banking system and economy going through this period, than total seconds have passed since the Bank was first established in 1694.
“With that in mind it feels important to not provide too much ‘medicine’ in the shape of Quantitative Easing. However, of equal importance is for the Bank to give the tentative recovery every chance. We very much need this to continue and strengthen, and low borrowing costs for yet another month will do no harm whatsoever.”