The Bank of England has held UK interest rates at a record low of 0.5% for the 19th consecutive month.The Monetary Policy Committee’s (MPC) decision had been expected, despite repeated calls from one member to raise rates to combat inflation.The Bank also said it would not be expanding its £200bn quantitative easing (QE) programme.Last month, another member of the MPC called for an increase in QE to boost the economic recovery.
Minutes from last month’s MPC meeting showed that Andrew Sentance had voted for a rate rise for a fourth straight month.However, fellow MPC member Andrew Posen gave a speech last month in which he called for QE to be expanded. He argued that additional stimulus measures would be needed to secure the recovery.QE is the Bank’s policy of pumping money into the economy in order to increase the supply of money and stimulate demand.Ian McCafferty, chief economic adviser to the CBI business group, said: “There is a lively debate between MPC members. Some fear that the weakness of the domestic economy will drive inflation well below target, thus requiring further monetary stimulus.
“Others think the medium-term inflation outlook is less benign owing to imported raw material costs and loosening inflation expectations. With the economy likely to be sluggish over the winter, this debate is unlikely to be resolved in the near term.”
Continue reading the main storyConsumer Prices Inflation (CPI) is currently 3.1%, well above the government’s 2% target rate. However, the Bank has stressed that it believes prices will start falling in the medium term.It believes that keeping interest rates low to help stimulate demand to secure the recovery is a more pressing issue than high inflation – Bbc