Interest rates stay on hold despite fears of UK slump
The Bank of England resists further emergency action despite fears that the economy will go into reverse by the end of the year.
The Bank‘s Monetary Policy Committee (MPC) has again kept interest rates at their record low of 0.5 per cent, maintaining its quantitative easing programme at £275bn after October’s shock increase.
The MPC pumped an extra £75bn into the economy last month amid signs that the recovery was heading towards a fresh crisis.
Economists do not now expect further action until early next year.
The bank unanimously voted for the QE boost amid fears that growth in the UK will grind to a halt by the end of the year, while governor Sir Mervyn King warned that the UK could be facing “the most serious financial crisis” it has ever seen.
Today’s decision came as the European Commission, the executive arm of the European Union, slashed its growth forecast for the UK this year to 0.7 per cent from 1.1 per cent but said there were better prospects for exports.
The UK’s gross domestic product (GDP) in the third quarter grew at a better-than-expected 0.5 per cent, but economists have warned that the figure overstated the underlying health of the economy.