Bank of England base rate remains at 0.5%Make Text Bigger
Hardly surprising, but still good news for borrowers is that the Monetary Policy committee voted to keep the Bank Base rate at 0.5% today. Of more interest though is the decision not to increase the levels of quantitative easing.
So far £325 billion has been used to stimulate the economy using the mechanism of quantitative easing. This is effectively the printing of imaginary money to buy back government borrowing in the form of Bonds or Guilts. The theory is that this will recapitalise the institutions that have purchased these government loans and release money that can be invested elsewhere into the economy.
It is very difficult to see if quantitative easing has had any effect as the economy is not currently growing, but would we be in a much worse position without it. The Bank of England is adopting a wait and see policy to economic growth which on the face of it would seem counter intuitive with the current climate. However, the fear is that if things did improve the stimulus provided so far could start to unwind and produce inflationary pressures that would be hard to control and potentially damaging.
My guess is that we may have to wait and see what happens in Europe before we get any big economic decisions in the near future.
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