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MSE News: Base rate held again as committee await emergency Budget
Former_MSE_Natasha
Former MSE 672 Posts
This is the discussion thread for the following MSE News Story:
"Interest rates have been kept on hold today as policymakers maintain their "wait-and-see" approach ahead of government plans to tackle the UK's deficit..."
These threads have been merged to avoid duplication.
"Interest rates have been kept on hold today as policymakers maintain their "wait-and-see" approach ahead of government plans to tackle the UK's deficit..."
Read the full story:
These threads have been merged to avoid duplication.
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(MSE Andrea says ok!)
12:00 10Jun10 BANK OF ENGLAND HOLDS KEY UK INTEREST RATE AT 0.5 PCT
12:00 10Jun10 BANK OF ENGLAND MAKES NO STATEMENT
12:00 10Jun10 Bank of England holds rates, no change on asset-buying
LONDON, June 10 - The Bank of England kept interest rates at a record low of 0.5 percent on Thursday, as widely expected, ahead of the new government's June 22 budget which will detail the extent of fiscal tightening Britain faces.
Most analysts expect no change in monetary policy until the end of this year at the earliest as the central bank seeks to offset sharp government spending cuts and fall-out from the euro zone debt crisis.
The Monetary Policy Committee -- comprising only eight of the usual nine members until a replacement is found for Kate Barker, whose term ended last month -- also kept its asset-buying target at 200 billion pounds ($291.3 billion), having put it on hold four months ago.
A spike in consumer price inflation to almost double the central bank's 2 percent target has triggered some concerns among policymakers, raising the risk it may start tightening policy sooner than most people think.
However, the central bank believes price pressures will be short-lived and that the large degree of slack in Britain's economy resulting from its deepest downturn since World War Two, will help inflation return to target before the year is out.
Economic recovery has been relatively muted, with GDP growing by just 0.3 percent in the first three months of this year, slower than the 0.4 percent achieved at the end of last year and weaker than the BoE had initially forecast.
And there are fears that mass lay-offs in the public sector, which employs a fifth of Britain's workforce, could prompt a renewed weakening in the second half of the year.
Conservative finance minister George Osborne has pledged to cut the country's budget deficit, currently almost 11 percent of GDP, at a "significantly accelerated" pace, starting with 6 billion pounds of cuts this year.
His first budget later this month is expected to contain a mix of spending cuts and tax rises that could have a profound impact on both growth and inflation.
(MSE Andrea says ok!)
* BoE keeps policy steady as expected
* Awaits June 22 budget for clarity on deficit cuts
* August seen key month for monetary policy path
LONDON, June 10 - The Bank of England made no change to interest rates or its bond purchase programme on Thursday, as it waits for Britain's new government to reveal the extent of its fiscal austerity measures in a June 22 budget.
The Monetary Policy Committee's decision to leave rates at a record low 0.5 percent and hold its asset purchase total at 200 billion pounds ($291.3 billion) was expected by all 61 economists in a Reuters poll, and elicited no market reaction.
Most analysts see no tightening until the fourth quarter at the earliest, as the BoE seeks to offset sharp government spending cuts and fall-out from the euro zone debt crisis.
Inflation, at almost double the central bank's 2 percent target, has not subsided as quickly as hoped, but policymakers will want to plug the government's new fiscal projections into its quarterly forecasts before altering their stance.
"August's quarterly Inflation Report from the BoE will be extremely important as it will set out how the contrasting influences behind the inflation outlook play out in the MPC's mind," said Philip Shaw, economist at Investec.
"It is possible to see rates beginning to rise toward the end of this year if the recovery gains traction. At the same time though, an aggressive tightening at the emergency Budget may persuade the MPC to hold its fire into 2011."
The European Central Bank also held borrowing costs steady at 1 percent, as widely expected.
TEMPORARY PRESSURES
Britain's central bank believes price pressures will be short-lived and that the large degree of slack in the economy resulting from its deepest downturn since World War Two, will help inflation return to target before the year is out.
Britain's economic recovery has been relatively muted, with GDP growing by just 0.3 percent in the first three months of this year, slower than the 0.4 percent achieved at the end of last year and weaker than the BoE had initially forecast.
And there are fears that the government's spending cuts will lead to mass lay-offs in the public sector, which employs a fifth of Britain's workforce, and could prompt a renewed weakening in the second half of the year.
Conservative finance minister George Osborne has pledged to cut the country's budget deficit, currently almost 11 percent of economic output, at a "significantly accelerated" pace, starting with 6 billion pounds of cuts this year.
His first budget is expected to contain a mix of spending cuts and tax rises that could have a profound impact on both growth and inflation in the months ahead.
A small number of economists reckon that may leave the BoE with little choice but to revive its bond-buying programme to help prop the economy as rates cannot fall any further.
"Our expectation is no change into 2011 and if things take a turn for the worse, which we wouldn't rule out once the new era of fiscal austerity starts to bite, who knows whether the MPC will have to start buying gilts again," said Chris Scicluna, deputy head of economic research at Daiwa Capital Markets.
(MSE Andrea says ok!)
Drinks for all :beer:
Hope the money you are saving now is going to make up for it.... :rotfl:
well, lets see how much you can borrow in terms of salary multiples today shall we within 2% of base...
Not many go over 3 times.
Enjoy paying the 40% they are going to take on your "profits" on your second home!!!!
How is that Alt-A disaster developing?