No fireworks this November
Published: 08 October, 2009
LONDON: City commentators are cautious about recovery and broadly support the Bank of England decision today to leave its main interest rate steady at a record low of 0.5% for the eighth month running and maintain the £175bn programme of quantitative easing.
Edward Menashy, chief economist of Charles Stanley, said: "The thrust of the MPC strategy remains expansionary given the frailty of the economy."
The decision recognises that the recent economic improvements have only come about because of the deep declines, he said. "On the asset front, as best exemplified by stock market indices, there are already signs that the rally may have run its course," Menashy said.
Stephen Boyle, head of RBS Group Economics said the next BoE decision will be trickier. "In an Inflation Report month, the MPC will have to decide whether recent signs of recovery are the first rays of light in a sustained recovery, allowing a suspension of QE, or a false dawn, necessitating further stimulus. There might not be fireworks at the November 5th meeting but the stakes will be higher."
The monetary policy committee provided no statement with its announcement except to say that it would complete its £175bn quantitative easing over the next month. The City widely expected rates to remain on hold this month because the MPC will be preparing its quarterly economic forecasts for November when it will decide whether to extend QE.