The Monetary Policy Committee (MPC) of the Bank of England has decided on no new stimulus measures at their latest meeting in October.
Interest rates have been kept on hold at their record low of 0.5% and their programme of quantitative easing has been maintained at £375bn.
Whilst boring, this inaction was widely expected.
The Bank is still spending its latest tranche of quantitative easing, so the earliest we would expect them to extend this facility is in November.
Whether the MPC favours further quantitative easing or an interest rate cut (or both) at their November meeting will depend on economic indicators published over the course of the next month.
This includes the first estimate of UK GDP, which will be published on 25th October, showing by how much the UK economy grew or contracted by in the third quarter of 2012.
Economists expect these figures to show a return to economic growth in the third quarter, following three consecutive quarters of contraction.
Our preference at Informed Choice is for a further rate cut rather than more QE.
Cutting interest rates to 0.25% or even to zero stands a greater chance of feeding through into the real economy, putting cash in the pockets of consumers by virtue of lower borrowing costs.
All QE appears to be doing is driving down Gilt yields and giving some confidence to equity investors, as well as lining the pockets of bankers.
For now at least, this boring ‘wait and see’ approach from the Bank of England is the right move.
Photo credit: Flickr/Bank of England
