Base rate held and QE increased by £75bn

by Aaron Strutt

Oct 07 2011

The Bank of England's Monetary Policy Committee has increased its Quantitative Easing programme by £75bn to £275bn, and kept interest rates on hold at 0.5%.

The news release from the Bank of England, says: "The pace of global expansion has slackened, especially in the United Kingdom’s main export markets. Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally. These tensions in the world threaten the UK recovery."

Minutes from the MPC’s September meeting showed Adam Posen had called for a further £50bn of Quantitative Easing and all nine members voted to keep interest rates on hold at 0.5%.

The previous change in base rate was a 0.5% reduction on 5 March 2009. The programme of asset Quantitative Easing was initiated on 5 March 2009 and the previous change in the size of that programme was an increase of £25bn to a total of £200bn on 5 November 2009.

The following links show the letters sent between George Osborne and Mervyn King:

http://www.bankofengland.co.uk/monetarypolicy/pdf/govletter111006.pdf

http://www.hm-treasury.gov.uk/d/chx_letter_061011.pdf

7 October 2011