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UK base rates held once more

Thursday, February 04, 2010

Source: Catherine Deshayes

In other news, The Bank of England (BoE) has kept base rates on hold at 0.50 per cent for the eleventh month in a row...

There are also no changes to the Quantitative Easing (QE) programme despite speculation that the BoE may consider an extension to the current £200bn QE programme which comes to an end in February.

We do not expect the Bank to raise interest rates in the short term despite inflation rising above the government's target to 2.9 per cent in December, particularly as the economy showed weaker-than-expected growth in the final quarter of 2009 at just 0.1 per cent.

Monetary policy will have to remain loose to offset the inevitable fiscal squeeze later this year.

Stuart Law, Chief Executive of Assetz, says, "Keeping the base rate at 0.5 per cent is of course good news for homeowners and property investors, and was expected.

"With the Bank of England having confirmed it is not planning to raise rates even in the face of some short term higher inflation it is pretty clear we are in for a sustained period of low rates with a key objective of stoking up the economy once more. This in turn will raise the tax take for the Government and help to reduce the National debt.

"It really does look like we are at the beginning of a classic inflationary period where real assets such as property rise in value for a sustained period, assisted by low interest rates and regardless of the majority view of a poor economic outlook," he added.