The flow of extra money into the economy has been put on hold after the Bank of England failed to announce an extension to its quantitative easing programme.
The flow of extra money into the economy has been put on hold after the Bank of England failed to announce an extension to its quantitative easing (QE) programme.
However, the base rate remains at a historic low of 0.5 per cent for the 11th consecutive month in an attempt to stimulate spending and business growth.
The decision to halt QE, under which £200 billion has been pumped into the UK’s economy, follows news of rising house prices this morning, with an uplift of 0.6 per cent in January, according to Halifax.
The UK exited recession in the fourth quarter of last year with growth of 0.1 per cent, and inflation rose faster than expected in December, but business support groups have argued that it is too soon to tighten monetary policy.
David Kern, chief economist at the British Chambers of Commerce, says, ‘We do not expect, or think it necessary, to increase the Quantitative Easing programme above £200 billion. But, it is very important for the [Monetary Policy Committee] to persevere with expansionary policies.
‘Businesses are still under pressure, and many smaller firms lack adequate access to finance.’
However, Edward Menashy, chief economist at investment group Charles Stanley, says there is a risk that the Bank of England is not doing enough to stem inflation, while the growing government deficit could give rise to a ‘sterling crisis’.
Adds Menashy, ‘Fingers are now firmly crossed that the Bank of England’s expectation that the rise in inflation will prove to be only a temporary blip will be correct.’