Posted: 8th September 2011
The Bank of England's Monetary Policy Committee (MPC) has once again voted to keep interest rates on hold at a record low of 0.5 per cent.
Here’s what a selection of experts had to say on the decision:
Ian McCafferty, CBI chief economic adviser, said: "Although recent data has brought further evidence of slower economic activity and business confidence has weakened, it is not clear that this requires an immediate policy reaction.
"We hope the UK economy will be on a firmer footing by next year, when a lower inflation rate will bring some relief for households.
“However, the global downside risks remain acute, so the Bank must continue to monitor global developments very closely and be prepared to be flexible."
Barry Naisbitt, chief economist at Santander, said: "Following the change in the voting at the August MPC, with all members voting to hold rates, and with the recent survey indicators of economic activity continuing to show at best a subdued picture, the expectation was that the MPC would vote once again to hold Bank Rate at 0.5 per cent.
“However, the slow pace of growth, both in the UK and globally, plus concerns about output falling in some industries has led to increased speculation about the announcement of further quantitative easing. Indeed one MPC member has been arguing for this for some while.
"Today's vote to hold rates was widely expected but does not rule out further action if the MPC, after having taken stock of further information, considers there is a need for a change in policy. With inflation still running well above target at 4.4 per cent and expected to rise further in the coming months, rates look likely to be left on hold for a considerable while.
“The minutes of the meeting are likely to be watched keenly by financial markets to see how views within the MPC are changing."
David Kern, chief economist at the British Chambers of Commerce (BCC), said: “UK businesses understand the MPC's decision to leave both interest rates and the quantitative easing programme unchanged.
“However, in the face of worsening economic situations in the US and Eurozone, and indications that UK growth remains weak, it is important to make every effort to underpin business confidence and avoid a setback. On its part, the government should consider ways of stimulating enterprise and job creation, for example adjusting business taxes, or introducing fiscal measures that encourage investment.
"We are not surprised that the MPC has maintained the QE programme at £200bn. Though some have argued for an increase to £250bn, the MPC has likely delayed such a move due to concerns around inflation, and a reluctance to alter policy too abruptly.
“The risks to the UK economy remain great, and it is important that businesses are able to grow and deliver jobs. Greater clarity on the outlook for interest rates would underpin business confidence. In the past any positive economic news, however modest, has often prompted pressures for higher rates, thus creating new business uncertainties.
"To avoid this situation from recurring, we believe the MPC should make clear that, unless circumstances improve very significantly, interest rate increases will not be on the agenda for another year. In the US, the Federal Reserve has stated that it expects to keep interest rates at very low levels until at least the middle of 2013.
“British business would welcome a similar move in this country."