The Bank of England has kept UK interest rates on hold at 0.5% and maintained their programme of quantitative easing at £325bn.
This latest decision from the Monetary Policy Committee (MPC) came as little surprise to economists who still expect interest rates to remain very low for the foreseeable future.
This is the 36th month that interest rates have been at 0.5%, marking the three year stage of the current low interest rate monetary policy.
There is a broad expectation that interest rates will remain at 0.5% for the rest of 2012 and possibly for most of 2013 as well.
We believe that the programme of QE could be extended further within a few months, as the Bank struggles to boost a flagging UK economy and avoid a double-dip recession. Minutes from the MPC meeting last month suggest that at least two of the members are in favour of further QE.
Savers are undoubtedly suffering from the Bank strategy to keep interest rates low. Some research published yesterday suggests that pension schemes are also victims of the money printing strategy behind QE.
The National Association of Pension Funds (NAPF) believes that defined benefit pension schemes have accumulated an additional £90bn of liabilities since the second round of QE was introduced in October 2011.
These higher liabilities could result in companies diverting cash away from jobs and investment in order to fill the black hole in their pension scheme funding. If this occurs, it could be argued that QE has had a negative effect on the UK economy.
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