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Bank of England Leave Rates Untouched

Wed, 15 Apr 2009

The Bank of England has decided to leave interest rates at 0.5 per cent following a dramatic series of cuts. With the base rate at a 315 year low, the Bank's Monetary Policy Committee feared that a further cut would deter banks from lending altogether, whilst a further reduction would add to the frustrations of savers, who have seen returns on their savings accounts dwindle in recent months. The Bank's decision to leave rates untouched for now will provide the economy with time to settle, with some experts voicing their belief that the economy has hit rock bottom.

One indication of the economy bottoming out, according to some commentators, was the Bank of England's drastic decision to begin quantitative easing last month - the process of printing money. The measure involves the bank buying government and corporate bonds totalling over £75 billion, of which the bank has already bought £26 billion of government bonds or gilts, in addition to £400 million of corporate bonds .

Worryingly for the Monetary Policy Committee, however, was the surprise rise in consumer price inflation in February. The rise has added credence to claims that the process of quantitative easing may see long-term inflation rates rocket.
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