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July 9, 2010

UK and eurozone keep rates unchanged

by Richard Kilner

Story link: UK and eurozone keep rates unchanged

The Monetary Policy Committee (MPC) of the Bank of England has elected to leave unchanged the United Kingdom’s interest rate at 0.5%.

The decision was widely expected, with the historically low rate having been in place for well over a year.

The MPC also chose to retain the scale of the quantitative easing asset purchase programme (effectively printing money) at £200bn.

However, inflation does remain above the target rate of 2%, a situation which has prompted the thinktank the OECD to call for rate rises in 2010.

Increasing the interest rate would help combat inflation, however there is also a risk that higher rates would choke off the still tentative recovery.

In related news, the European Central Bank (ECB) also decided to keep the eurozone’s rate unchanged, at the historic low of 1%.

 

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