No change to interest rates sets new record
Published 10/09/2010 | 08:00
The Bank of England maintained its emergency support for the economy by keeping interest rates at 0.5% for the 18th month in a row - setting a record for the longest spell on hold since 1997.
Policymakers also continued with the Bank's £200bn quantitative easing (QE) programme amid uncertainty over the path of the UK's recovery.
While the UK economy rose by a far-better-than-expected 1.2% in the second quarter, recent data has pointed to sharply slower growth since then.
Fears that UK exporters will struggle to fill the gap left by weaker government and consumer spending were highlighted earlier yesterday when figures showed a record deficit in the trade of goods during July.
Recent surveys from the manufacturing and services sectors have also suggested that the rally may be fading as firms begin to see much slower demand.
This week's demise of social housing giant Connaught - the first high-profile casualty of the austerity drive - added to fears over the impact on the recovery.
The bank's nine-strong Monetary Policy Committee (MPC) has left rates unchanged at their historic lows since March 2009.
Rates have been on hold for the longest spell since the Bank was given responsibility for setting monetary policy in 1997.
The previous record during the MPC's time was when rates were on hold at 4% for 15 months between November 2001 and February 2003.
MPC members are torn between the pressures of stubbornly high inflation and the threat of a double-dip recession.
But a split is emerging among members, with above-target inflation leading Andrew Sentance to vote for a quarter-point rate increase in the previous three months.
Northern Bank economist Angela McGowan said there was no surprise in the MPC's decision, which she said was influenced by better growth in the second quarter. But she said hopes were lower for the rest of 2010, with growth of up to 0.7% forecast for quarter three.
"There have been calls from some corners to pre-empt the forecast slowdown in both global and national economic growth through further quantitative easing - that call has clearly been ignored.
"The MPC has always stated that the impact of quantitative easing is not immediate, and with inflation still hovering above target levels, they will be treading very slowly."