BoE holds base rate at 0.5%, ends QE programme for now

The Bank of England has decided to hold the country’s base interest rate at its historic low of 0.5 per cent for yet one more month while placing its quantitative easing programme on hold for now in the face of its February £50 billion boost, experts say.

While inflation has remained high over the past three years, the base rate, as decided by the BoE’s Monetary Policy Committee, has remained at its current rate for the entire time. The government’s 2 per cent inflation rate target is currently exceeded by the Consumer Prices Index, which stands at 3.5 per cent currently.

At the MPC’s April meeting, the Committe declined to extend its QE programme – essentially printing money – due to inflationary concerns.  Additional rounds of QE have been called for after news that the UK economy has slipped into a double-tip recession, especially in light of the eurozone financial crisis deterioration, but the MPC made the decision that the risks of a lengthened recession were lower than those of ongoing high inflation levels, especially as the nation’s savers have seen the returns on their savings accounts dwindle to nearly nothing due to the erosive affects of the rising costs of living.

Many economic experts have been predicting that there will be overall growth by the ed of the year, even in the face of the economy flippin back into recession during 2012’s first quarter.  Sir Mervyn King, the BoE’s governer, admitted that the Bank could have taken stronger steps to prevent the financial crisis that occurred in 2008, though he was quick to say that the BoE attempted to warn that there was an underestimation of financial market risk at the time.

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