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Bank of England concerned about the rise in inflation

admin — Wed, 21 Apr 2010 21:41:09 +0000

According to Moneyfacts.co.uk, the Bank of England has admitted that they are concerned about the rise in inflation, which is currently at 3.4%, well above the government’s 2% target.

Recent figures revealed that inflation increased from 3.0% in February to 3.4% in March.

Minutes from the Monetary Policy Committee’s (MPC) monthly meeting revealed that inflation is likely to stay above the long term target of 2% for some time yet.

The MPC said “Given that a period of above-target inflation was in prospect at a time when monetary policy was exceptionally accommodative, this was a source of concern for some members.”

Recent research conducted by Moneyfacts.co.uk found. rising inflation is hitting savers in the pocket.

A basic rate taxpayer now needs to find a savings account paying at least 4.25% in interest to prevent their savings pot being eroded, of which there are currently just 44 available on the market.

For a higher rate taxpayer, the challenge is to locate a savings account rate of 5.64%, a return only currently available through four accounts. It comes at a time when interest rates are at an historic low, further penalising savers.

Minutes from the MPC’s meeting also revealed that the decision to freeze the base rate of interest at 0.5% – a level that level the measure has been marooned at since March 2009 – was taken unanimously.

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Bank Base Rate remains at 0.5%

admin — Thu, 08 Apr 2010 12:02:41 +0000

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%.

The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

The base rate has not changed for over 12 months with the last change on 5 March 2009 with a reduction of 0.5 percentage points from 1.0% to 0.5%.

A programme of asset purchases financed by the issuance of central bank reserves was initiated on 5 March 2009. The most recent change in the size of that programme was an increase of £25 billion to a total of £200 billion on 5 November 2009.

With the timing of the General Election the next Monetary Policy Committee meeting will conclude on the morning of Monday 10 May, with the decision announced at 12 noon. The Inflation Report will be published as originally scheduled on Wednesday 12 May.

Information on the Asset Purchase Facility can be found on the Bank of England website at http://www.bankofengland.co.uk/monetarypolicy/assetpurchases.htm.

The Bank will continue to purchase high-quality private sector assets on behalf of the Treasury and financed by the issue of Treasury bills, in line with the arrangements announced on 29 January 2009.

Bank base rate stays at 0.5%

admin — Thu, 04 Feb 2010 15:43:16 +0000

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion.

After a substantial fall in output, the United Kingdom economy recorded sluggish growth in the final quarter of 2009. Spending by households appears to have picked up a little, though that may partly reflect temporary factors. The rate of decline in businesses’ investment spending appears to have eased. And the world economy continued to recover, raising the demand for UK exports.

Low Interest Rates may stay for longer than expected

admin — Thu, 07 Jan 2010 16:47:55 +0000

Today’s decision by the Bank of England (BoE) heralds a period of low interest rates stretching into the medium to long-term, say experts.

Most analysts were unsurprised by the MPC’s vote to keep interest rates at 0.5% and continue its programme of quantative easing (QE), which is on target to end in February. The Bank has now held rates for 11 consecutive months.

Azad Zangana, European economist at Schroders, says: “The MPC remains frozen in wait-and-see mode by voting to hold interest rates today at 0.5%.

“Inflation is expected to rise sharply over the coming months as energy price base effects from last year unwind and the impact of VAT reinstated at 17.5% feeds through.

Bank of England’s view short-term inflationary pressures are temporary and we expect inflation to fall back towards the end of the year.

“With the UK’s tendency to experience ‘double-dip’ recessions, the MPC is unlikely to raise interest rates until a sustained recovery is certain – possibly not until the fourth quarter of 2010.”

Analysts at Legal & General (L&G) also expect the Bank to remain cautious well into 2010.

Ben Thompson, director of mortgages at L&G, echoes a general level of uncertainty within the industry: “We have never seen financial intervention and stimulus on this scale before and we don’t know for sure how it will pan out for borrowers. The normal rules don’t necessarily apply.”

However, February, when the Bank’s QE programme is due to come to an end, is being seen as a possible turning point.

William Dinning, head of strategy at Aegon Asset Management, says: “We do not expect the Bank to do anything new until February when it has digested its latest inflation report and can then make a decision on whether to renew its QE gilt-buying programme that expires at the end of this month.’

Edward Menashy, chief economist at Charles Stanley, agrees: “The current QE programme of £200bn is expected to be complete by February, so we can expect further information from the MPC when it announces in early February.”

The Bank’s decision to hold rates is bad news for savers, though.

Steve Folkard, head of pensions and savings policy, AXA, says: “Obviously the decision is not great for savers but any upwards move would only have been marginal, with minimal positive effect. The Bank is still very sensitive to the large numbers of people with debt, and they are higher on its agenda right now.”

Bank Base Rate stay on hold

admin — Thu, 10 Dec 2009 16:31:08 +0000

The Bank of England’s Monetary Policy Committee (MPC) has announced that the base rate of interest has been frozen at a historic low of 0.5% for the ninth month in succession.

The MPC also voted to continue with its programme of Quantitative Easing (QE) – which was extended by an additional £25 billion last month to £200 billion – a move welcomed by businesses who believed that the economy would stall without it.

Bank Base Rate stays at 0.5%

admin — Thu, 05 Nov 2009 12:45:19 +0000

The Bank of England (BoE) has maintained interest rates at 0.5% for the eighth consecutive month.

It is also pumping a further £25bn into its quantitative easing programme.

Neil Young, chief executive of Young Group, said the Monetary Policy Committee (MPC) is unlikely to make any significant change to the base rate until the economy is firmly back on track.

He added: “Given current indicators pointing to the slow pace of the UK’s economic recovery, it comes as no surprise that the Bank of England is considering an additional stimulus in the form of an extension to its quantitative easing programme.

“The MPC has previously acted decisively in a bid to stimulate the economy and lending markets. However, there is clearly still some way to go in getting the economy back on its feet.

“Despite some positive economic news beginning to filter through, the impact of the MPC’s policy of quantitative easing has not yet crystallised; demonstrated by the consensus view that the MPC will announce plans to extend its programme by purchasing an additional £25bn to £50bn of assets. Until there are clear signs of stability and a steady return to growth, the MPC is unlikely to move towards a rise in the base rate.”

Bank Base Rate stays at 0.5%

admin — Thu, 08 Oct 2009 14:38:34 +0000

As expected the Bank of England’s Monetary Policy Committee has voted to keep the base rate on hold at 0.5% where it has been since March this year.

Many commentators expect the rate to remain at this level until well into next year, with one even predicting rates will stay at this level for another five years.

The Bank of England also said that it was continuing with it’s £175 billion of quantitative easing, which it expected to take another month to complete.