This morning, the Bank of England's Monetary Police Committee (BOE) decided to keep its interest rate at the current all-time low of 0.5%, as was expected. The BOE announced that it would continue its 75-billion pound program, which is supposed to increase the money supply in hopes of keeping deflation at bay.
The BOE stated that, "since its previous meeting a total of just over 26 billion pounds of asset purchases had been made and that it would take a further two months to complete that program." Some experts believe the BOE will hold interest rates at 0.5% "well into 2010." Before the bank made its decision, the 10-year yield was hovering around 3.34%.
Bank officials have hinted that the official interest rate probably won't drop below its current perch, as such a move could hurt struggling banks and deepen credit issues.
Some economists believe that this move doesn't guarantee further spending, as some banks may be led to stockpile the funds in attempts to balance their sheets. If this is the case, the private sector won't see the money that is intended to help boost spending.
In fact, an independent think tank stated yesterday that the economic situation in Britain isn't as rosy as some may be led to believe. The National Institute of Economic and Social Research estimated that the British GDP contracted 1.5% in the first quarter. The group said that the current GDP drop "is very similar to that of the recession which began in the summer of 1979. While there is no obvious reason why the profit of the current recession should match that of the early 1980s, the rate of output decline so far has been very similar."
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Reader Comments (Page 1 of 1)
4-09-2009 @ 11:24AM
ironmanlivez said...
i liv in uk the situation is bad than worse wat is the gov doing, i cant feed my family in this news we the people want gov to do something solid done and fast I moved in a new neighborhood, i was searching for property to let in central london for quite some time and i accidentally found this amazing website no agents 24 with loads and loads of information about tips for tenants, I really like my new house. i went out for some fresh air today early morning, although i am generally not the morning person type but i have to admit i really enjoyed it.