The Bank of England has announced that interest rates will remain on hold at the historic low of 0.5% for at least another month.
The widely expected announcement today follows the latest Monetary Policy Committee meeting for January.
A more interesting announcement, if no change can be described as ‘interesting’, is that the Bank will not yet extend it’s asset purchase programme of quantitative easing.
Back in October they announced an extension of £75bn to this programme of QE.
With the UK economy appearing to deteriorate and ongoing concerns over the euro sovereign debt crisis, we expect to see this QE further extended in the early part of 2012.
Investors, savers and borrowers can comfortably plan for the year ahead based on continued low interest rates.
The latest industrial output figures from the Office for National Statistics today showed a sharp downturn in the manufacturing sector last November. This combined with continued reports of tough trading conditions for retailers is likely to dominate thinking at the Bank.
Higher interest rates now, whilst benefiting savers and appeasing those who believe price inflation needs bringing under stricter control, would damage the already fragile economic recovery. We need to wait until the Budget in March to hear the latest official economic growth forecasts for the UK, but they are unlikely to be anything but very low.
We look forward to reading the minutes from this latest Monetary Policy Committee meeting when they are published later this month in order to gauge a better understanding of when further QE could occur.
Photo credit: Flickr/Michael McDonough
