Interest rate frozen and quantitative easing halted

4 February 2010

The Bank of England has voted to freeze the base rate at 0.5% for the 11th consecutive month - and agreed to halt its quantitative easing programme at £200 billion.

The central bank's Monetary Policy Committee (MPC) says that, despite rising inflation, the "sluggish" economy and low consumer spending justify maintaining the record-low base rate.

It believes that the low interest rate and the creation of new money still have some way to go to "support domestic activity". 

"On balance, the MPC believes that the prospect is for a gradual recovery in the level of activity," the Bank of England says. It also believes that inflation will fall below its 2% target going forward, despite this increasing to 2.9% in January.
Ahead of the decision, economists were broadly agreed that the MPC - which has pretty much exhausted its armoury of weapons to get the economy back on track - would choose to freeze the £200 billion programme it has been following since March 2009.
With the general election expected to be held in May, some economists believe the Bank of England will ‘lie low’ until June at the earliest.

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