Bank of England unanimous on interest rate freeze

The Bank of England's Monetary Policy Committee (MPC) agreed unanimously that interest rates should stay at 0.5% this month, minutes of the meeting show.

All nine members voted for no change, even though inflation is currently at 3.5%, well above the 2% target.

However, some MPC members noted that the weakening of the pound could lead to inflation risks.

The MPC was unanimous in keeping the £200bn quantitative easing (QE) programme unchanged.

Under QE, the Bank pumped new money into the economy by buying assets, such as government bonds, in an attempt to boost lending by commercial banks.

Currency move

The jump in CPI inflation to 3.5% in January was viewed as being caused by temporary factors, including the return of VAT to 17.5%.

The notes of the meeting said inflation was set to remain above the 2% target for some months to come, and that there were certain risks from the weak pound, which has now fallen in value by 25% since 2007.

George Buckley, chief UK economist at Deutsche Bank, said the picture painted by the minutes was pretty much what was expected.

"We were expecting that it was going to be 9-0 for both rates and QE, which turned out to be the case," he said.

Posted at 09:05PM Mar 17, 2010 by Kelly Board in The Economy  |  Comments[0]