BoE keeps interest rates at 0.5%

As expected, the bank decided to hold off on adding to the £375 billion of asset purchases and kept its main benchmark rate at a record low of 0.5%.

Barry Naisbitt, Chief Economist at Santander UK, said:

The Monetary Policy Committee’s decision to hold Bank Rate again today came as no surprise.  Although last month’s decision to hold rates was not unanimous, the incoming economic news over the past month has not been strong enough to support a change in view from last month.  The decision was, however, made against a background of continued positive news on economic activity, with the survey indicators of economic activity continuing to show strong readings in services and construction but not in manufacturing.  In addition, the official statisticians have just marked up past GDP figures as part of a wide ranging methodological change.  The economy now looks to have contracted less in the recession than previously estimated and output now is further above the pre-recession peak than previously thought.  Against this, inflation fell again in July, to 1.6%, still below the 2% target.  This low inflation provides scope for the MPC to hold rates at their current level for a while longer.”