Belfast Telegraph

No boost for economy as Bank holds interest rate

By Jamie Grierson and Heather McGarrigle

The Bank of England has put more emergency medicine for the UK economy on hold, despite more evidence that the recovery is grinding to a halt.

Interest rates were kept at a record low yesterday of 0.5% while the Bank's quantitative easing (QE) programme remained at £275bn after the increase of £75bn in October, following a meeting of the bank's Monetary Policy Committee (MPC).

Esmond Birnie, chief economist of business advisers PricewaterhouseCoopers, which already downgraded Northern Ireland's 2012 growth forecast to 0.6%, said: "The MPC has opted, yet again, to wait and see in respect of the precarious state of Eurozone economies and in the hope of some improvement in UK confidence and growth.

"However, the most recent industrial production and manufacturing data show output down in October. UK regions reliant on manufacturing, public sector employment and with large retail centres are suffering and Northern Ireland will not be exempt from the pain."

The Bank has already acknowledged that it will take until February to administer the recent expansion in its QE programme.

Economists expect a further £50bn of QE from the Bank in the first and second quarters of 2012, taking the total up to £375bn.

Northern Bank's chief economist Angela McGowan said: ""Without massive fiscal stimulus coming from the UK government, we forecast that the Bank of England will continue to buy gilts, UK government bonds issued by HM Treasury, to stimulate economic growth."

Meanwhile, counterparts on the European Central Bank launched a lifeboat of emergency measures yesterday. As well as slashing interest rates for the second time in five weeks, to 1% from 1.25%, ECB president Mario Draghi announced more lenient terms on loans to ease financial pressure on struggling banks.

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