No Change: Bank Keeps Interest Rate On Hold

The Bank of England has once again opted to keep the interest rate unchanged at 0.5%.
had predicted the rate would stay at its current level amid fears a rise would kill hopes of a recovery.

The interest rate has now stayed unchanged since March.

The Bank also decided to leave its quantitative easing (QE) programme to boost the money supply unchanged at £175bn, despite calls from some business leaders to raise it to £200m.

The news comes as the economy continues to be boosted by positive surveys and reports.

GDP is expected to have returned to positive growth for the third quarter when data is released later this month.

But there are concerns over the strength and speed of recovery.

A 1.9% fall in manufacturing output during August after two months of growth surprised economists.
The Sky Money Panel, which consists of economists and business leaders, is urging a cautious approach to fiscal management.

Although the wider economy is expected to return to growth between July and September after five quarters of recession, the Bank's preferred measure of money supply showed sluggish growth during August - casting doubt on whether the QE policy was working.

The MPC will look again at the impact of its QE policy next month with the help of the Bank's latest inflation forecasts.

Alongside its call for a QE increase, the British Chambers of Commerce has pressed the MPC to cut the rate at which financial institutions leave money on deposit at the Bank, to encourage lending in the wider economy.

The MPC is worried that the lingering problems in the financial sector will hamstring a recovery while banks repair their damaged balance sheets.

The minutes of its September meeting said there could be "false dawns" for the
economy.