The Bank of England has kept interest rates on hold at 0.5% in August, at the same time announcing no changes to their £375bn programme of quantitative easing.
This met general expectations for the latest Monetary Policy Committee meeting, although there have been some indications recently that interest rates could be cut in the second half of the year.
Before a rate cut is implemented, the Bank will want to see what impact their latest £50bn extension to QE will have on the British economy. That most recent extension is expected to take around three months to complete.
The interest rate decision from the Bank of England matches the decision made by the European Central Bank, which held interest rates across the eurozone at 0.75%.
A struggling UK economy, price inflation falling towards target and continued problems in eurozone have all opened the door to the possibility of lower interest rates and further QE from the Bank of England.
The success or otherwise of the new Funding for Lending scheme – where the Bank lends up to £80bn to high street banks at discount rates, to lend to individuals and business owners – will also influence the decision to cut interest rates.
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