Bank keeps interest rates at 0.5 per cent
The Bank of England has kept interest rates at 0.5 per cent for another month, in line with expectations, following a run of weak economic data.
Purchasing managers’ surveys have shown the UK manufacturing sector, once the bright spot in Britain’s lacklustre recovery, contracting for the last two months.
An equivalent survey of services firms recorded its biggest fall in a decade in August, denting expectations for a strong rebound in growth in the third quarter after nine months of virtual stagnation.
But it issued no statement on whether it would re-start quantitive easing to help bolster the flagging economy.
“Although the case for more stimulus has certainly strengthened, the deterioration in the demand outlook was evidently deemed insufficient to warrant an immediate move,” said Barclays Capital analyst Simon Hayes.
Interest rates have stood at 0.5 per cent for more than two years, the longest period of policy inertia since World War Two, and money markets are not pricing in any tightening until well into 2013.