Interest rates held at 0.5% as MPC hands 50bn boost to asset purchase scheme

06 August 2009

Business

Interest rates are set to remain at 0.5% for a sixth consecutive month following today's meeting of the Bank of England Monetary Policy Committee (MPC).

In addition, the MPC voted to expand its Quanitative Easing (QE) programme, with an extra £50bn added to the asset purchase scheme, taking the total budget to £175bn.

The QE programme, which was launched in March with an initial budget of £75bn in a bid to kickstart the economy, is designed to boost lending to businesses and consumers.

The MPC warned that "although there are signs that credit conditions may have started to ease, lending to business has fallen and spreads on bank loans remain elevated".

The committee said that in the UK, the recession had been deeper than previously thought, with GDP falling further than original estimates in the second quarter of 2009.

However, it added that the pace of contraction had moderated and that recent business surveys suggested that "the trough in output is close at hand", while there had been signs that output in the UK's main export markets was stabilising.