By Marcus Leach
With new Bank of England governor, Mark Carney, chairing his first Monetary Policy Committee meeting today (Thursday) there were some analysts who felt we would see a first change in the interest rate for over three years.
However, the MPC opted to maintain the interest rate and level of quantitative easing at 0.5% and £375 billion respectively.
David Kern, Chief Economist at the British Chambers of Commerce (BCC) said that this was the right decision, adding that the economy is showing signs of recovery at the moment.
“The Committee made the right decision to hold interest rates and quantitative easing at the first meeting under Mark Carney’s leadership," he said.
"With the economy showing signs of gradual recovery, confirmed by the data we have seen this week including our own economic survey, there is currently no case for additional QE. An increase in QE risks adding to inflation later in the year, putting even more pressure on businesses and consumers.
“However, the existing QE programme can and should be used in more innovative ways. We urge Dr Carney and the Committee to focus on measures that will boost lending to businesses. Rather than just gilts, the MPC should consider purchasing private sector assets, such as securitised SME loans. This would make banks less risk-averse in lending to growing businesses who are finding it difficult to access finance.
“With the global markets in turmoil due to uncertainties around the US central bank and continued pressures in the eurozone, our economy needs stability above all else. Businesses need reassurance from the MPC that interest rates will remain low, and that there will be no major policy shifts until the recovery is in a much stronger state.”
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