Bank holds rates at record low

 

The Bank of England held fire on further emergency measures for the UK economy today, despite another dose of worrying news from the manufacturing sector.

Interest rates were kept at a record low of 0.5% while the Bank's quantitative easing (QE) programme remained at £275 billion following the increase of £75 billion in October.

The no-change decision came despite a call from the British Chambers of Commerce to increase its support with a £50 billion top-up to QE, following October's shock increase.

But the Bank opted not to move yet as it waits for a clearer picture of how the economy fared in the final quarter of 2011 following mixed recent data.

Fears intensified today that the economy might have slipped into reverse in the fourth quarter of 2011, after Office for National Statistics figures revealed industrial production declined by 0.6% in November, following a 1% fall in October.

Manufacturing output fell 0.2% in November although its decline was at a lower rate than the previous month.

There have also been recent signs that the economy improved slightly in December, with industry surveys coming in stronger than expected.

Growth in the powerhouse services sector, which makes up 75% of the UK economy, is likely to have saved the wider economy from contraction in the final quarter, while surveys reported growth in manufacturing and construction.

But the crisis in the eurozone - which the Bank cited as one of the key threats to UK recovery - continues to rumble on as EU leaders are yet to deliver a concrete plan to resolve the region's problems.

Economists still expect a further £50 billion of QE from the Bank of England in both the first and second quarters of this year, taking the total up to £375 billion.

The minutes from the monetary policy committee's (MPC) last meeting in December suggested a further cash injection to boost the economy was highly probable but not until February at the earliest, as the committee has yet to complete the latest round of QE.

Ian McCafferty, chief economic adviser at business body CBI, said: "Today's decision by the MPC to leave monetary policy unchanged was expected, since the current round of asset purchases is not yet complete.

"But with economic conditions fragile and inflation expected to undershoot, the MPC appears to be signalling that a further extension of the asset purchase programme is likely in the months ahead."

Holding interest rates at 0.5% will be welcomed by borrowers, but the extended period of lower lending costs spells more misery for pensioners and savers, who will continue to suffer low returns on their money at a time when inflation is eroding the value of their deposits.

PA

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk