Bank of England leaves rates unchanged

Date: Thursday 04 Mar 2010

The Bank of England has held interest rates at 0.5% and taken no further action on quantitative easing (QE) amid conflicting signals over the state of the UK economy.

The Bank decided not to extend its QE programme past £200bn last month and has maintained that position today.

Bank of England governor Mervyn King last month hinted the UK's quantitative easing programme may restart again if the UK economy takes another downturn. However, recent data showing the economy grew by 0.3% in the fourth quarter of 2009 rather than the 1% rise initially recorded may have deterred policy makers from extending the programme.

Other more specialised economic data has been more mixed.

Figures yesterday showed that activity in the services sector, which dominates the UK economy, reached a three-year high in February, but the construction sector contracted.

Britain’s manufacturing industry appears to be enjoying a strong first quarter as data revealed growth remained steady at a 15-year high in February.

‘Recent indications that economic activity bounced back relatively well in February after taking a significant weather-related hit in January diluted the case for quantitative easing to be revived,’ said Howard Archer, chief UK and European economist at the analyst group IHS Global Insight.

However, he said he would not rule out further quantitative easing given the difficulties in the face of economic recovery.

‘We expect the Bank of England to keep interest rates down at 0.50% through 2010 given likely persistent concerns about the strength and sustainability of the recovery,’ he said.

‘The economy seems destined to go through many more twists and turns over the coming months.’

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