UPDATE: No shift in policy from MPC as ECB cuts rates again

BANK of England policymakers today resisted pressure to deliver a further boost to the economy amid growing signs of the recovery grinding to a halt.

Members of the bank’s Monetary Policy Committee (MPC) voted to peg the base interest rate at its record low of 0.5% and also to leave its programme of Quantitative Easing (QE) to boost the money supply on hold at �275billion.

The MPC decision came as the European Central Bank launched a series of measures to protect the crisis-stricken eurozone.

Besides cutting its interest rate for the second time in five weeks, from 1.25% to 1%, the ECB announced easier terms on loans to reduce the pressure on struggling banks and extra measures to boost money market activity.

The MPC’s decision, at its last monthly meeting of 2011, comes a day after official figures showed a worse-than-expected 0.7% decline in industrial production in October, adding to fears that the UK economy as a whole will contract during the final quarter of the year.


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Some business groups had appealed for further action from the MPC, with British Chambers of Commerce chief economist David Kern calling for a further �50bn to be injected into the programme of QE.

However, the decision to leave policy on hold for now was widely expected, with the minutes of the MPC’s meeting last month having indicated that members felt the additional �75bn of QE announced in October would take two more months to complete.

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Chris Parrish, group treasurer at the Yorkshire Building Society, which includes the Norwich & Peterborough society in the East of England, said: “Today’s decision to leave the base rate unchanged at 0.5% was widely anticipated across the industry.

“The Consumer Prices Index (CPI) inflation rate fell to 5.0% in October from 5.2% the previous month and although this is markedly higher than the Government’s target, the instability of the domestic and worldwide economies continues to be the principal factor in the MPC’s decision-making.

“Many economists now believe that the base rate will remain at its current level for the foreseeable future.”

However, many economists do anticipate further extensions to the QE programme in the New Year, with the squeeze on consumer incomes, amid high inflation and muted wage growth, and the wider uncertainty created by the eurozone debt crisis continuing to take their toll on growth.

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