Send us your pictures, video, news and views by texting NORTHERN ECHO to 80360 or email us
Bank of England keeps interest rates at 0.5 per cent
THE Bank of England kept interest rates on hold today and left its £375bn economy-boosting drive unchanged as hopes grow over a strong pick-up in UK growth.
Policymakers - who concluded their monthly meeting yesterday to allow some officials to attend the G20 meeting in Washington - have already pledged to keep rates at their record low of 0.5 per cent until the unemployment rate falls to 7 per cent.
The Bank's Monetary Policy Committee (MPC) also held off from more money- printing measures under its quantitative easing (QE) programme, which has now been held at the same level since July last year as the economic recovery has begun to gain traction.
Recent figures have pointed to a surge in third-quarter growth, with some experts pencilling in a rise of as much as 1 per cent in what would mark a sharp improvement on the 0.7 per cent growth seen in the previous three months.
But expectations have been reined in this week after disappointing official data for the manufacturing sector and worse-than-expected trade figures - described by one analyst as a reality check for the UK economy.
Think-tank the National Institute of Economic and Social Research (NIESR) released its latest forecast yesterday, giving a more muted prediction for 0.8 per cent growth in the third quarter.
According to the Office for National Statistics (ONS), output from British factories fell unexpectedly in August, sending overall industrial production down 1.1 per cent in its biggest monthly fall for nearly a year.
The ONS added that the UK's trade deficit remained stubbornly high at 3.3 billion in August, down only marginally on the £3.4bn recorded in July.
The figures came as a setback after last weeks economic cheer, when the closely watched Markit/CIPS purchasing managers index (PMI) showed the dominant services sector grew at its fastest pace for 16 years in the third quarter.
House price data from Halifax also showed a 6.2 per cent year-on-year increase in September in the biggest hike since 2010 as the Government's Help to Buy initiative continues to send would-be buyers flocking into the market.
Economists said the disappointing manufacturing figures confirm that the recovery remains volatile, but believe it remains on the right track and should continue to gather pace.
The strength of the recovery in recent months has increased pressure on the Bank's rates pledge, although America's ongoing partial government shutdown and its decision to delay QE tapering has slightly pushed back the markets expectation for the first UK rate hike.
Despite this, the City is still expecting the Bank to raise historically low interest rates by early 2015 and remains unconvinced over the Bank's prediction that unemployment will not fall to the 7 per cent threshold until mid to late 2016.
Comments are closed on this article.