Interest rates and QE remain unchanged

4 November 2010

The Bank of England held interest rates at their record low of 0.5% for the 20th successive month, with quantitative easing also unchanged.

Despite yesterday's announcement from the Federal Reserve of its second tranche of quantitative easing, the Bank of England's Monetary Policy Committee (MPC) opted to ignore the path of pumping further money into the economy.

Although a difference of opinion is expected among the MPC's members over the decision, the move was far from a surprise following indicators suggesting the green shoots of recovery in the economy.

There was a 0.8% rise in GDP figures for the third quarter, following on from the second quarter's 1.2% increase.

Analysts from Charles Stanley commented: "Undoubtedly, the surprisingly strong third-quarter UK GDP figures dissuaded the MPC from extending quantitative easing.

"Third-quarter GDP translated into an annualised growth rate of 3.2%, which was both above trend and in excess of the 2.35% rate estimated by the Office of Budget Responsibility as recently as June. This better performance was augmented by stronger manufacturing data for October.

"Overall, the stronger economic data has probably inclined the MPC to wait until February 2011 before reviewing the QE2 issue."



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