Interest rates on hold but more money to be ploughed into economy

Following today’s Monetary Policy Committee meeting the Bank of England has announced that it is keeping interest rates on hold at 0.5%. Although the interest rate has been left on hold it is still at its lowest level in the history of the Bank of England, which goes back over three hundred years.

The government has already indicated that there is no more room for base rate cuts at present, but has launched a plan to try and assist the economy through quantitative easing. In addition to announcing that the base rate will be kept on hold the central bank also said that a further £50 billion is going to be pumped in to the UK economy as part of this process.

So far the government is though to have ploughed around £54 billion into the economy through quantitative easing, and was set to have pumped £75 billion into the economy by June. However, the figure has now increased to £125 billion, which means an additional £50 billion that will be used to try and ease the stress on the economy.

Industry experts had expected the Bank of England to wait until next week before making any announcement with regards to extending the quantitative easing programme, as it is then that up to date economic forecast figures were expected to be published. However, the central bank has announced its decision today.

The Bank of England has been given the go ahead to spend up to £150 billion in total on quantitative easing by the Treasury, and some officials have expressed surprise that the announcement has only increased the amount of money that will be ploughed into the economy to £125 billion. One economist said that this could be because Bank of England officials were confident that the recovery was going as planned.

In its statement the Bank of England stated that “the world economy remains in deep recession” but also added that “surveys at home and abroad show promising signs that the pace of decline has begun to moderate”.