Bank to keep interest rate at record low
This month’s interest rate meeting comes after a run of disappointing purchasing manager surveys in manufacturing, construction and services, suggesting an expected rebound to growth in the third quarter is far from guaranteed.
But experts still believe the Bank’s Monetary Policy Committee is most likely to keep interest rates at their record low of 0.5 per cent and hold back from any further quantitative easing (QE), having already pumped £375bn into the economy.
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Hide AdBank governor Sir Mervyn King insisted just last week that there were “a few signs” of recovery while official figures revealed a second upward revision to gross domestic product for the second quarter to a better-than-feared decline of 0.4 per cent.
Philip Shaw, chief economist at Investec Securities, believes the Bank will increase QE in November, after the last £50bn round, announced in July, is completed.
He said: “At this juncture, the committee is effectively in ‘on hold’ mode, albeit with a bias towards easing, and a move next week is probably off the cards – the Bank rate is very likely to remain at 0.5 per cent and the QE target at £375bn.
“It is far more likely that the MPC will wait until November’s meeting for a serious review of policy.”
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Hide AdIn surveys this week, manufacturing output shrank at a faster pace in September than the previous month, construction output also declined and the services industry saw its rate of growth slow down. However, last week retail figures from the CBI showed a welcome rise in sales for this month.