Interest rates and QE held steady

The Bank of England's Monetary Policy Committee (MPC) has voted to maintain the official bank base rate of interest at 0.5% for the sixth consecutive month. It was also confirmed the scale of the programme of quantitative easing (QE) will remain at £175 billion but kept under review, thereby not ruling out future changes. The last time the interest rate changed was a reduction of 0.5 percentage points in March, while a £75 billion programme of asset purchases was initiated in the same month. However, as the state of the economy deteriorated further, the programme was increased to a total of £125 billion in May and to its present level of £175 billion in August. Most commentators said the decision to leave the current policies unchanged was unsurprising, although business leaders have suggested additional measures might be necessary to ensure the recent economic upturn is not derailed. "Persistent weakness in lending to businesses, particularly to small firms, poses serious risks to the early signs of economic recovery," said David Kern, chief economist at the British Chambers of Commerce (BCC). "As a temporary measure, the MPC should consider cutting the interest rate paid on deposits kept by commercial banks at the Bank of England, and in some circumstances make this rate negative. This might discourage hoarding of cash and encourage the banks to lend more."