Bank holds rates and keeps QE at £325bn

The Bank of England’s Monetary Policy Committee (MPC) today resisted calls to expand its quantitative easing programme and cut interest rates, even though the UK is officially back in recession.

The MPC kept the main interest rate at 0.5%, a record low it has been at since the height of the crisis, while maintaining the QE programme at £325bn.

The MPC’s decision comes after some surprisingly positive data in the last week.

The Markit/CIPS UK Services PMI survey showed activity in the sector grew at the same pace in May as in April, defying expectations of a slowdown in growth. The survey index was 53.3 in May, unchanged from April, with a reading above 50 indicating growth.

The services sector is the UK’s main driver of GDP, accounting for about 74%.

The move to leave rates on hold comes despite the double-dip recession.

The latest data showed the economy contracted by 0.3% in Q1, worse than the initial estimate of 0.2%.

Elsewhere today, China cut its deposit rate by 0.25%, and its lending rate by the same amount, while giving banks more flexibility to offer lower rates than the official figure.

 

This article was first published on Investment Week

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