Belfast Telegraph

Wednesday 17 September 2014

Bank holds rates again in 'wait and see' outlook

The Bank of England has held off from further emergency support, despite the threat of a triple-dip recession hanging over the UK economy.

Policymakers remained in "wait and see" mode again this month, holding rates at their record low of 0.5% and maintaining the bank's quantitative easing (QE) programme at £375bn.

Recent figures estimate that the economy slipped back into the red in the final three months of last year, but the Bank's Monetary Policy Committee (MPC) is hopeful that its Funding for Lending Scheme (FLS) and a recent fall in the price of sterling will boost the recovery.

Its hopes for the turnaround were given a boost after the Office for National Statistics reported a 1.6% rise in manufacturing output for December, a figure ahead of City expectations.

The increase in production was in part fuelled by rising exports as the UK's goods trade deficit narrowed to £8.9bn in December.

The figure remains high by historical standards as the UK attempts to rebalance towards being an export-oriented economy.

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said the latest month of inactivity from the Bank came as little surprise.

She said: "The weak fourth quarter is unlikely to have swayed further members into more QE action and, if anything, some survey indicators have been a little better at the start of the year.

"It's still wait and see on how FLS, which is the main monetary game in town, will help businesses as well as households."

The Bank's multibillion-pound FLS scheme, where it provides cheap money to lenders, has shown some encouraging signs of providing firepower to the economy after Halifax house prices recorded their strongest quarterly rise in three years this week.

But the decision prolongs the agony for savers, who are unlikely to see any respite from painfully low interest rates for the foreseeable future.

Markit economist Chris Williamson said: "Consumer spending remains under pressure from low wage growth and high inflation, and threats to the global economic outlook persist, especially in relation to political tensions driving a renewed escalation of the eurozone crisis."

 

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