Thursday, 9 July 2009

Interest rates held at 0.5% for a 4th month

The Bank of England has announced that interest rates are to be kept at 0.5% for the time being, only the 4th month that the rate hasn’t changed since last September. This stall in changing the interest rates highlights how highly the Bank of England is prioritising its attempts to encourage banks to start lending again, therefore boosting credit and raising the ‘nominal spending’ (the cash value of spending) in the economy. The Bank of England has not injected any fresh money into the economy this month as part of its quantitative easing process, as it wants to allow itself to pause and assess economic data to measure how successful the quantitative easing is going.

Ilona Krohn, principal economic advisor at Greater Manchester Chamber of Commerce, has supported the decision to hold interest rates: “The decision to hold interest rates was widely expected. The pros and cons of quantitative easing are still a major topic of debate among world economists. For the time being, it is important that the Bank of England maintains a transparent and consistent policy in order to restore confidence in the financial system and assist businesses with their forward planning."

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