Connected Research

Union policy research in the 21st century

Interest rates remain unchanged

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The Bank of England has today kept interest rates unchanged, at 0.5%. This is the third month in a row that rates have stood at this level following a succession of sharp falls over the autumn and winter which saw rates reduced six times from a high of 5% in October 2008.

At the same time, the Bank did not announce any new measures in its programme of quantitative easing, for which it has authority to spend up to £150bn, one-third of which should be used to purchase private sector assets. By the end of May, it had spent some just under £73bn of this money, and it intends to spend a total of $125bn by July. The Bank is to keep the scale of the programme under review.

Amidst evidence of some signs of economic recovery or, at least, some welcome degree of stabilisation (increasing signs of consumer optimism; a Halifax survey showing rising house prices), this is a key time for economic policy-makers since money and credit growth, which should have been the product of quantitative easing, is not yet apparent. This is likely to lead to interest rates remaining low, into 2010, according to some commentators.

At the same time, the lack of evidence of the programme easing credit availability and cost is worrying since it is these that will keep inflation in check.

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Written by Calvin

04/06/2009 at 6:07 pm

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