Property News | BoE sits on its hands

Browse By Subject

Money

Property

Social

Professional

BoE sits on its hands

Friday, March 05, 2010

Catherine Deshayes

The Bank of England has opted against providing fresh aid for the economy after a year of record low interest rates and emergency stimulus measures.

Its rate-setting committee marked the first anniversary of quantitative easing by leaving the programme unchanged at £200bn and holding borrowing costs at 0.5%. The no-change policy was widely predicted, with all members of the Sky News Money Panel both expecting and endorsing such an approach.

It comes a week after official estimates suggested Britain's climb out of recession was marginally stronger than previously thought in the final quarter of 2009. But the 0.3% economic growth was still less than analysts' initial expectations, while markets are also showing jitters about the scale of the UK's budget deficit and uncertainty regarding the general election outcome.

Recent surveys have showed manufacturing and services activity picking up pace and consumer confidence at its highest level for two years. Snow and a rise in VAT have hit retailers, while house prices also registered their first fall in nearly a year during February, according to surveys from Halifax and Nationwide.

Tax expert George Bull, of Baker Tilly, told Sky News it was essential for the Bank to aid recovery by providing confidence and stability. He further commented: "Threats to borrowing rates or giddiness in the markets about extending QE should be avoided. Acting harshly now on either might shake what little business confidence is returning to the real economy."

Meanwhile Bronwyn Curtis, head of global research at HSBC, said very little had changed in the economic landscape which would warrant a change of tack by the Bank of England.

"We know that the early stages of any economic recovery are uncertain and, at present, the uncertainty is unusually high," she told Sky News. This is just when we expect policymakers to show that they are a safe pair of hands."

Source: www.ananova.com