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Bank of England goes for 'wait and see' approach

The Bank of England have adopted a “wait and see” approach to the recession with unchanged interest rates announced today.

The Bank’s Monetary Policy Committee (MPC) said interest rates would remain at the record low of 0.5% for the third month in a row.

Interest rates have dropped form 5% last October, and the £125bn Quantitative Easing (QE) - effectively printing more money - is in need of review.

Chief economic adviser at the British Chamber of Commerce said: “The positive mood in the financial markets should not lull anyone into a false sense of security.

“Tackling the recession must remain the priority, especially with unemployment rising and firms continuing to slash investment.

“The MPC must up the tempo at which they execute QE, while increasing the scheme’s size beyond £125 billion.”

The UK’s public service sector announced growth for the first time in over a year, along with renewed confidence in the housing market with Halifax saying house prices rose 2.6% - the biggest increase since October.

Bill MacLeod, head of assurance at PricewaterhouseCoopers LLP in Newcastle said: “We expect the Bank of England to remain in ‘wait and see’ mode for a couple of months while it awaits more evidence on how effective the monetary and fiscal loosening already in the pipeline is proving to be.

“It can then decide if any further QE is needed beyond the £125bn of asset purchases already in progress.

“The rise in the pound in recent weeks will, if it persists, keep important prices down and reinforce the downward trend in inflation that we expect in the short term, this supports our view that we are still a year or so away from the point where the MPC is likely to start raising interest rates.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .