The Bank of England has announced its decision on UK interest rates, and has once again decided to maintain rates at 0.5%.
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Interest rates have been kept at this level since March 2009, when the bank of England reduced them from 1.0%. The current rate is the lowest in history.
Since the Bank of England has maintained the same rate for more than two years, the decision to keep the 0.5% rate did not come as a surprise to those in the industry.
And with the current economic situation, and the threat of a double dip recession, few people expected an increase in the base rate.
“The decision to leave the Base Rate unchanged at 0.5% and to announce a further round of Quantitative Easing was widely anticipated across the market,” said Chris Parrish, Group Treasurer at Yorkshire Building Society.
The UK economy remains weak and potentially on the brink of another recession as it attempts to manage the effects of the Euro-zone crisis and the mounting national debt and this is likely to suppress any rise in Base Rate to the back end of 2012 at the earliest.”
As well as maintaining the base rate, the Bank of England announced that it is increasing asset purchases, otherwise known as Quantitative Easing.
An additional £50 billion will go into the Bank’s asset purchase programme, to bring the total to £325 billion. However, the idea of increasing the programme has been criticised by some.
“The Bank of England has already conjured up £275 billion out of thin air to push gilt and bond interest rates down, but there is precious little proof that this money is having the desired effect,” said Simon Rose, from Save Our Savers.
“Throwing more money at the problem will have only one effect, it will stoke up inflation and impoverish pensioners and savers,” added Rose.
The current base rate is good news for homeowners on a variable mortgage, who will carry on enjoying repayments with low rates of interest.