BoE holds rates at 0.5 percent, maintains QE

inspector_monkfish

12:00 04Jun09 BoE holds rates at 0.5 percent, maintains QE

LONDON, June 4 - The Bank of England Monetary Policy Committee held interest rates at a record low as expected on Thursday and said it would maintain its 125 billion pound quantitative easing programme.

inspector_monkfish

12:00 04Jun09 BANK OF ENGLAND HOLDS KEY UK INTEREST RATE AT RECORD LOW 0.5 PCT AS EXPECTED

12:00 04Jun09 BOE SAYS MAINTAINS 125 BILLION STG ASSET-BUYING PROGRAMME

12:00 04Jun09 BOE SAYS QE PROGRAMME WILL TAKE ANOTHER 2 MONTHS TO COMPLETE, SCALE TO BE KEPT UNDER REVIEW

12:01 04Jun09 BoE leaves rates steady, keeps QE unchanged

LONDON, June 4 - The Bank of England left interest rates unchanged at a record low of 0.5 percent for the third month running on Thursday, and said it would continue its 125 billion pound asset-buying programme to tackle the recession.

"The Committee expects that the announced programme will take another two months to complete," the Bank said in a statement. "The scale of the programme will be kept under review."
The Monetary Policy Committee's decision was widely expected, coming a month after the central bank said it would boost the quantitative easing programme by 50 billion pounds.

Since then, surveys have suggested the economy, which is on course to shrink by more than 3 percent this year, may be over the worst. The pound has strengthened by around 3.5 percent versus the currencies of Britain's main trading partners <=GBP> over the past month.

House prices jumped 2.6 percent in May, the biggest monthly rise since 2002, according to the Halifax index published earlier on Thursday.

The service sector, which makes up three-quarters of the British economy, also returned to growth in May, purchasing managers' data showed on Wednesday.

But policymakers are likely to remain cautious, and BoE Governor Mervyn King has pointed to the high level of uncertainty surrounding the current outlook.

Most analysts expect the BoE to extend its quantitative easing programme by at least another 25 billion pounds, the maximum currently permitted by the government.

If the central bank wanted to do any more than a total of 150 billion pounds, it would have to seek permission from the Treasury, though few believe that would be a problem.

Treadmill

Good call from the BoE

ad9898_3

That QE money is going to run dry soon, probably in time for winter, I still believe trying to prop up a property bubble with borrowed money that will have to be paid back by the same people who indebting themselves now is a dangerous road to go down, it's a short term policy that will end in tears.

pickles110564

ad9898 wrote: »

That QE money is going to run dry soon, probably in time for winter, I still believe trying to prop up a property bubble with borrowed money that will have to be paid back by the same people who indebting themselves now is a dangerous road to go down, it's a short term policy that will end in tears.

Ad, I dont think they are using QE to prop up the housing market but to help the whole of the country to ease out of recession.

andygb

ad9898 wrote: »

That QE money is going to run dry soon, probably in time for winter, I still believe trying to prop up a property bubble with borrowed money that will have to be paid back by the same people who indebting themselves now is a dangerous road to go down, it's a short term policy that will end in tears.

I certainly agree with you. The fact is, that billions has ended up on the bank's balance sheets, bonus payments have still been honoured. The BoE base rate is at a record low, and savings rates have collapsed. However, if you want a fixed rate mortgage, then you will still be looking around 5%. Unauthorised overdraft rates have increased, along with credit card rates. Businesses have been finding it more difficult to obtain working capital, with the result that many smaller ones have closed, making hundreds of thousands of people unemployed.
The government would have the people try to inflate the economy by borrowing more - the very thing which got us into this mess to start with.
Property prices should be allowed to fall to a natural and sustainable level, and the money which was given to the banks, should have been put into social housing schemes, in order to take the pressure off first time buyers, who have been all but forced into buying inflated property, at a time when unemployment and repossessions have all risen.

Thrugelmir

ad9898 wrote: »

That QE money is going to run dry soon, probably in time for winter, I still believe trying to prop up a property bubble with borrowed money that will have to be paid back by the same people who indebting themselves now is a dangerous road to go down, it's a short term policy that will end in tears.

QE is slowly working its way through the wider economy and having a beneficial effect. QE isn't propping up the property market.

The only thing that is propping up the property market is peoples perception of the market. We've yet to reach a position of forced selling. The scales have yet to tip downwards. If they did then an avalanche could follow.