Bank of England announces no change to rates

Interest rates are to remain at 0.5 per cent for another month, the Bank of England’s Monetary Policy Committee (MPC) said today.

The decision to keep the institution’s lending rate at its all-time low reflects policymakers’ concerns over continued tight lending conditions from UK banks.

Continuing fallout from the financial crisis has led to mortgage loan approvals falling by as much as 50 per cent year on year, while credit to Britain’s businesses also remains tight.

The MPC also announced that there would be no expansion in the Bank’s £125 billion quantitative easing programme, which is still on track to finish next month.

Known as the modern-day equivalent of printing money, quantitative easing is an even more radical way of boosting lending flows around an economy - thereby encouraging recovery from the present recession.

However, taken together, both low interest rates and quantitative easing retain the potential to cause high inflation rates over the long term.

Ben Thompson at insurer Legal & General commented: ’Throughout 2010 the challenge for the MPC will shift towards combating inflation whilst not going so far as to choke off any economic recovery.

’Add into the mix the inevitable tax increases that will be required and the knock-on effect that will have on spending patterns and you start to get an idea of the enormity of the task. It will become a completely different challenge to the one they have been facing for the past year or so.’ADNFCR-2318-ID-19257838-ADNFCR