Interest Rates Held At Record Low

Mon, 14 Sep 2009

The Bank of England (BoE) has decided to keep the short-term interest rates at a record low of 0.5 per cent for the sixth month in a row.

The Bank said that its Monetary Policy Committee voted to maintain the "official bank rate paid on commercial bank reserves at 0.5 per cent", in a bid to spur the UK economy which has been in recession since spring 2008.

Interest rates were reduced from 1 per cent to 0.5 per cent in March this year.

The BoE announced it would also continue to pump up to £175 billion into the economy under the quantitative easing policy, primarily aimed at stabilising Britain’s battered financial system.

David Kern, chief economist at the British Chambers of Commerce, said: "Following last month's welcome decision to increase quantitative easing to £175 billion, we are not surprised that the MPC has chosen to persevere with the current programme and keep interest rates at 0.5 per cent.

However, he said "persistent weakness in lending to businesses, particularly to small firms, posed serious risks to the early signs of economic recovery".

Recent data suggested that the UK economy has begun to emerge from recession, but the Bank of England has warned several times that recovery would be "slow and protracted".
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