UK interest rates remain at record low

The Bank of England has held UK interest rates at a record low and decided not to pump more money into the economy via quantitative easing (QE).

The decision to make no change to policy comes after recent figures on the economy showed good growth.

Gross domestic product (GDP) grew at 0.8% in the third quarter - better than expected - and recent manufacturing data was also upbeat.

Until these reports some experts had expected there would be more QE.

On Wednesday, the US announced it would make a further $600bn (££375bn) of stimulus available over the next eight months.

The move gave worldwide share values a boost on Thursday.

The Bank's "no-change" decision was welcomed by lobby groups and economists, but a number of commentators, including the British Chambers of Commerce (BCC) said they thought the UK economy would need its own QE boost in the near future, partly to help smooth the economy through the coming government cuts."

The chief economist at the BCC, David Kern, said: "We believe there are strong arguments for injecting additional QE into the economy over the next few months."

"As VAT increases to 20% in January, and the deficit-cutting programme moves to a higher gear in 2011, risks of a setback will inevitably worsen."

However, Ray Boulger, from mortgage broker John Charcol, said the economic outlook - and therefore any future action by the Bank - was unreadable.

"How the economy performs in 2011 as the impact of the Comprehensive Spending Review progressively bites will be a major factor in determining whether the next move on monetary policy is more easing by increasing the scale of Quantitative Easing, or tightening by increasing the Bank Rate (and perhaps reversing QE)," he said.

Recent meetings have seen growing disagreement among the Bank's Monetary Policy Committee (MPC) members over policy.

The vote at the end of the MPC's last meeting was a three-way split, minutes revealed. Seven of its members voted for no change to interest rates and no additional stimulus spending, one person wanted to see rates rise, while another member voted to see QE restart.

The minutes to this week's two-day meeting will be published on 17 November.

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