THE Bank of England kept monetary policy on hold yesterday, adopting a wait-and-see attitude in the face of both political and economic uncertainty emanating from Westminster and Greece.
As the markets expected, interest rates were kept at their historic low of 0.5 per cent and quantitative easing was on hold at £200bn.
Although there are signs that the UK economy has returned to growth, economists broadly welcomed the Bank’s cautious stance. Investec’s Philip Shaw said: “The current recovery does not appear to have enough legs to sustain itself without ultra low rates for the time being, while uncertainties over the path of UK fiscal policy, plus the recent round of market pressures related to the Greek crisis also reinforce a stance of wait and see.”
The painful fiscal tightening that is expected to lie ahead will also mean that the ultra-loose monetary policy remains in place for a long time, possibly years, says ING’s UK economist James Knightley.
Greater detail about the Bank’s forecasts will be given in the quarterly inflation report, which will be published on Wednesday.
The Bank of England is expected to revise its inflation forecasts slightly higher.