Today the Bank of England announced a halt to its quantitative easing (QE) scheme, much to the relief of city analysts, who believe that the rise in inflation is one of the main contributors to the bank’s decision to halt the programme.
The programme saw the Bank of England pump £200 billion directly into the UK’s economy. All of the money set aside for the QE scheme has now been spent and the bank has stated that it will not be asking the Treasury for permission to print more.
A spokesperson for the Bank commented that the existing money would continue to “impart a substantial stimulus through the economy for some time to come.”
Despite this announcement the Bank of England stated that they would consider further purchases, however, this would depend on the economic climate.
Interest rates are expected to remain low for some time to come, in an effort to avoid shattering the fragile growth seen over the last quarter in 2009.
Consequently, the Bank’s monetary policy committee (MPC) made the announcement that interest rates would remain at their current low level of 0.5%, for the eleventh consecutive month.
Many city analysts don’t expect to see interest rates rise until the second quarter of 2010 for fear of the UK falling back into a declining economy – termed as a “double-dip recession.”
The Confederation of Business Industry’s (CBI) Chief Economic Advisor, Ian McCafferty, commented that it is no surprise the Bank of England have decided to keep interest rates and QE at the same levels. He added that although the economy is stabilising it still faces some serious obstacles and recovery remains “shallow-rooted.”