Morning:
8°c
The Bank of England's monetary policy committee voted to keep interest rates and the quantitative easing money-printing programme on hold today.
Its decision means base rates have now remained at their record low of 0.5% for a year, while also meaning the Bank will not, for now at any rate, be extending QE beyond £200 billion.
The European Central Bank followed suit later this afternoon, keeping rates on hold at 1%.
The Bank of England is faced with competing pressures of rising inflation, which at present is running at 3.5%, and continuing wobbles in the economy.
Governor Mervyn King has repeatedly said the inflation rise of recent months is a temporary spike that should not result in a knee-jerk reaction to raise interest rates.
Howard Archer, chief economist at IHS Global Insight, applauded the no-change decision: “The economy seems destined to go through many more twists and turns over the coming months.
“Furthermore, when interest rates finally do start to rise, the increases are likely to be gradual and limited because of the need to offset the marked tightening in fiscal policy that will kick in in 2011 at the latest.”
Lee Hopley, chief economist at the Engineering Employers' Federation, said: “The MPC continues to face a mixed economic picture with growth at the end of 2009 helped by stimulus measures that have now all but gone. An unchanged position at this point is the right one given the ongoing uncertainty about the strength of the recovery.”
While the Bank of England gave no statement outlining its reasoning, European Central Bank governor Jean Claude Trichet said: “We had overwhelming consensus. The economic recovery in the euro area is on track, although it is likely to remain uneven.”
Asked about the Greek crisis, Trichet said the decisions taken by the Athens government were “convincing” and repeated that it was “absurd” to talk of Greece leaving the eurozone.
The mixed picture of the British economy was highlighted today as figures from the Halifax showed falling house prices in February while, on the other hand, the Society of Motor Manufacturers and Traders said new car sales were up 26.4% on the same month a year ago.
Halifax said the average cost of a home fell by 1.5% during the month to £166,857, in figures which echoed the 1% slide reported in the Nationwide's survey of the same month. The slide was partly blamed on a fall in activity caused by the wintry weather and the stamp duty threshold falling back to £125,000 at the end of December. But some economists said such bumpy price moves would be seen all this year.
SMMT figures showed although about a fifth of the cars bought were under the temporary car scrappage scheme, the evidence was there that consumers remain confident enough to spend.
Reader views (15)
Can't remeber who said this but goes something like … only governments can make paper worthless just by putting ink on it!
- Ink, London, 04/03/2010 16:36
Report abuse
The last government to pronounce such enthuasiam about the economy was a conservative way back when announcing "We are now seeing the green shoots of recovery" 2 years later things weren't much better......
If you want an opinion on the economy don't ask a politician or banker but someone on the high streett
- Tony, Hove England, 04/03/2010 14:28
Report abuse
Damn stopping printing money, there goes my only excuse regarding ink leaching from my currency when out shopping.
- Bill, Hove Sussex, 04/03/2010 14:10
Report abuse
What is the point of having a Bank of England; when all the other banks do not charge the same interest rates?
One would tend to think that the Bank of England only looks after, and supports other banks and not the Nation in general at all etc.
If 0.5% is making any difference to the nation at all, why are we in trouble, why are the unemployed figures rising, house prices falling, and why are we all not spending beyond our means again?
Being just a simple man, I often wonder why we have a Bank of England at all, after all we have no gold to protect, only over-worked printing presses, and I am sure the Evening Standard could print our money just as well as the Bank of England can etc.
- Mickinlondon, london, 04/03/2010 12:20
Report abuse
And Labour think that Ken Clarke's comments about sterling are the reason we are in a financial mess?
How about this continous fabrication of money using the BoEs printing press? Every new pound printed devalues the dwindling number that we already have.
This government's poor management of the economy and stubborn resistance to holding an election are what are causing sterling to be de-valued.
- Nobby Clark, Perth, the Scottish one, 04/03/2010 12:18
Report abuse
Not good at all having the pound going up and down. Euro steady furthermore we don't produce anything any longer over here everything imported.while in other european countries they don't import so much food from far away countries. I think I might join my friends in the far east things are not looking good over here, are we hading for a major crash and social unrest?
- M, London, 04/03/2010 11:43
Report abuse
Printing money can be a very useful and powerful tool to get out of deep recession and it's a tool being used by many governments not just the UK government. Ethan your comparison to Zimbabwe is just laughable and your continual use of EUSSR has become tedious.
- Mike L, London, 04/03/2010 11:32
Report abuse
Anyone remember the turkish lira? It was 400,000 to the pound once. I'd hate for the pound to go the same way against every other currency 
[clue, this is what tends to happen if you think just printing more money is the answer]
- Marianne, SW France/London, 04/03/2010 11:26
Report abuse
Whats the matter with our lot, can't see the wood for trees
Isn't it time to get things on the move, the Mint workers must be the next to get a big Bonus.
- Richard Edmunds, Rayleigh UK, 04/03/2010 10:31
Report abuse
Here we go again !
They should encourage savings and increse base rate !
- Bernard Parke, Guildford, 04/03/2010 10:20
Report abuse
Nothing to worry about Gordon says. The economy is on the up proving his policies are working? Then he woke up and found his tablets had run out and no one would lend him a fiver as his credit was dodgy. So he prints more children's post office money. Which is now worthless as it has no takers. I think he should be elected for another five years and then, maybe, his voters will have get the message. Dole payments, sickies and all other benefits will have gone. All houses will have been nationalised along with all the banks. We will be administered by the IMF and Gordon with be where he belongs in Fairy Land.
- Albert Hall, hove england, 04/03/2010 10:19
Report abuse
best investment now are premium bonds.. hold the maximum amount and you will easily outperform a basic saving's account at the laughable interest rate they offer....
- Joanna, london, 04/03/2010 10:02
Report abuse
Quantative Easing...sounds cuddly doesn't it.
What the public do not realise that it's 'Bankerese' for effectively the state stealing your cash by stealth.
If a country or a compnay is worth a finite amount. A currency unit, pound or like a share is a small percentage of that amount. Double the number of pounds and your new pound or share is worth half of what it was. It's buying power is now halved. So goods that need to be bought on the world market cost twice as much. Thats why prices seem to be shooting up. Effectively it's the same as the Government coming to your house and taking half your cash and half your savings. It's really state theft of the peoples assets.
Expect Oil and most food to be more expensive as they need to be imported. Oil itself makes everything you buy more expensive.
Make no mistake this money printing is NOT a good thing. It's the Zimbabwe solution to a dreadful government and the utter stupidity of it's handling of the country.
Godon McRuin himself said in 92 a weak currency is a sign of a weak Government. In that at least he was right.
If the public woke up to how much we are being robbed blind by this bunch of political surrender monkeys they'd riot and have McRuins head on a pike at traitors gate.
- Ethan, EUSSR, 04/03/2010 09:42
Report abuse
This may be the tipping point at which attempts to keep inflation at reasonable levels are abandoned and we proceed towards 1970's type high inflation, which will enable the Government to lower its debt, at the expense of every saver in the country.
- Jon Kent, Hertford. UK, 04/03/2010 09:23
Report abuse
Sheer stupidity
- Peter, Moscow RF, 04/03/2010 09:15
Report abuse
