The MPC has also opted not to change its quantitative easing strategy.
Moneycorp senior dealer Mark Thompson says the decision highlights there’s little room for a further rate cut.
He says it could also signal another weakening of sterling against the dollar: “Recent announcements by the MPC, coupled with the G20 summit and some isolated figures offered a hint of optimism. A rally on sterling was immediate but, rather disappointingly, the G20 effect evaporated earlier than optimists had hoped. Some are seriously doubting whether recent gains for sterling will be enough to put a conclusive end to its ailments of the last six months.
“With the UK downturn lagging that of the US, it seems likely that there is scope for further sterling weakness." Meanwhile, CBI deputy director-general John Cridland notes the MPC’s role has moved away from merely setting rates. “They are now having to influence monetary conditions more directly, with quantitative easing as their main lever,” he says.
“In the coming months, the MPC will have to judge both the pace and amount of their asset purchases. It is too early to judge quite how quickly this will begin to affect the broader economy, but the first tentative signs of the impact on gilt yields, corporate spreads and commercial paper issue have been encouraging.”
Related articlesPredictions for 2009 BudgetInflation surprise for the UKInterest rates down to 0.5 per centPicture source
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.