The time has come round again for the Bank of England to decide whether or not it will raise interest rates. However, wide speculation amongst the finance community is that the cost of borrowing will remain at 0.5%. So it’s not exactly come as a surprise that this is exactly what they announced today.
It’s rather unfortunate that even the most optimistic of analysts do not foresee any increase in UK interest rates until at least the fourth quarter of 2010.
Having already spent £200 billion pound to boost the UK’s economy it is also speculated that it is highly unlikely that they will put any more money into the economy through the Bank of England’s quantitative easing plan. Again, rather unsurprisingly the predictable, yet safe Bank of England strategy is has come to pass.
However, as usual the Monetary Policy Committee (an arm of the Bank of England) are poised ready to pump more money into the economy should the need arise.
The Senior Analyst at Caxton FX, Duncan Higgins, commented on the Bank’s decision:
“As expected, the Bank offered no surprises in their policy decision. Though Mervyn King and other members are yet to dispel the possibility of further monetary easing, the chances of such a move appear to be diminishing. This week’s UK PMI figures have impressed, providing a degree of stability for sterling. Indeed the pound’s hefty slide in recent days is itself offering support to Britain’s recovery, alleviating the need for further stimulus.”
Mr Higgins added that while the UK market remains in a volatile state it is likely the Bank of England will remain on the sidelines. He went on to say:
“The £200 billion budget will still be filtering its way through the system and policy adjustments will wait for its full effects to be made clear.”
Despite this rather predictable news the strength of the pound has improved and is currently at 1.51 against the US dollar.