The Monetary Policy Committee of the Bank of England has made indications that the UK interest rates for August will remain at their current level of 0.5 per cent.
Not only have historically low interest rates been in place now for 18 consecutive months, all MPC members are expected to continue to keep the Treasury’s quantitative easing programme on the back burner for the time being.
QE, or as it’s more colloquially known as simply creating new money ex nihilo, is designed to ease the burden on financial institutions by providing them more working capital.
The BoE first conceived of the QE programme in the March of 2009, which coincides with when the initial interest rate adjustment to 0.5 per cent occurred; the outlook of the UK economy was bleak at the time, as the last economic of such magnitude had not been seen since the middle of the 20th century.
In spite of these continued historically low interest rates, regulator Andrew Sentance cast hi vote once again to raise interest rates to combat inflation. Mervyn King, the governor of the BoE has remained staunch in his support for the lowered interest rate, however.
Industry insiders have speculated for months that the Bank of England would raise interest rates in order to bring down the UK economy’s currently rampant inflation; the government’s target for the economy has been set at 2 per cent, yet the inflation rate is well above that, at 3.2 per cent.
Despite the plans of the government to keep the economy’s inflation target at 2 per cent for the majority of the coming calendar year, here is little expectation for the current interest rate to undergo any changes.
Meanwhile, the MPC welcomes a new regulator to its fold: Kate Barker, whose term ended at the end of this past May, has been replaced by Mr. Martin Weale in time for the meeting to determine the setting of any new interest rates.
Mr Weale has been the chief executive for the National Institute of Economic and Social Research for the past fifteen years, and has been appointed by the government, along with three other external members, directly to the BoE. The NIESR has a reputation as a think tank with influence in regards to economic trending data.