After the previous two meetings saw Spencer Dale and Martin Wale vote for a 0.25% increase of the base rate, August’s meeting has shown that all 9 members of the committee voted to keep rates as the same. The Bank of England governor Mervyn King has also proposed that the Bank should maintain the stock of asset purchases throughout the UK at £200 billion, with eight of the nine members voting in favour.
The consistency of the Monetary Policy Committee in recent months has been phenomenal. The base rate has now been held at an all time low of 0.5% for 29 consecutive months with the last rate change in the UK being seen in March 2009. The Bank of England is also concerned with inflation rises at the moment as well, with Consumer Price Index figures hitting 4.4%, considerably higher than the government’s 2% (+/-1) target.
The minutes of the latest Monetary Policy Committee have claimed; “The slowing in world demand growth and the heightened tensions in financial markets meant that the balance of risks to the medium-term inflation outlook had clearly shifted to the downside. Some members considered whether there was a case for increasing the degree of monetary stimulus by undertaking a further programme of asset purchases.
The minutes continued; “Those members concluded that the case was not yet strong enough, particularly in light of the lower path for Bank Rate now implied by financial markets. Further asset purchases might nonetheless become warranted were some of the downside risks to materialise."
During times of global economic uncertainty, we welcome the stability of the Monetary Policy Committee for keeping Britain as a ‘safe haven’ according to Chancellor of the Exchequer George Osborne. Although the effects have been slow to be seen, the 0.5% interest rate has been reasonably successful within the UK, as consumer confidence and purchasing power parity for many consumers has increased, benefiting the mortgage broker in the process.
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