Bank of England base rate remains at 0.5%

by Neil Patterson

13:51 PM, 7th June 2012
About 8 years ago

Bank of England base rate remains at 0.5%

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Bank of England base rate remains at 0.5%

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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Comments

19:22 PM, 8th June 2012
About 8 years ago

Can't really see the the point in QE for the banks.
All they do is keep it or offer it out at unaffordable rates, so no one borrows anyway.
QE should be taken away from the banks.
The BOE being the lender of last resort should lend directly to SME's etc, cutting the banks out of the equation.
They have shown they are not fit for purpose.
The only way for the BOE to guarantee that low intereset rates and lending at affordable rates occur is to do it themselves!
The other factor not often mentioned is that borrowers or potential borrowers do not risk approaching the banks for fear of a review occurring which invarably results in no new lending and a reduction or removal odf existing facilities.
No wonder there is no 'growth' in the economy.
And it is still being caused by the banks.

22:44 PM, 9th June 2012
About 8 years ago

QE helps the banks (therefore us all) stay solvent. Simples.

3:12 AM, 11th June 2012
About 8 years ago

Err more the case of too big to fail.
Banks should go bust and take all their shareholders with them
The problem has been that banks are too big to fail presently.
The -ankers have the govt over a barrel.
They wouldn't have if they were smaller and were not involved in casino banking.
We are paying the price for their stupidity and they are still raking in the bonuses; you just couldn't make it up!!
Meanwhile the economy is stuck cos the banks won't lend out the QE, which is why I say it is pointless giving it to them.
QE is meant to encourage the banks to lend by creating capital.
If they refuse to lend there is no point in giving them QE.
They will just stay zombie banks; which is no use to the economy.
The banks must be forced to lend and the govt needn't worry about getting their bailout money back just yet.
They are paying billions in welfare aswell when that QE should be promoting growth via affordable finance for SME's which will or should reduce people on welfare benefits.
Chances of this happening ZERO.
The country is subsequently -ucked!!


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