Business group backs MPC on monetary policy

Friday 11 January 2013

Interest rates have been kept on hold for yet another month, after the Bank of England's Monetary Policy Committee decided against changing course.

The nine-member panel voted to keep the base rate at its historic low of 0.5 per cent, and maintain the current level of quantitative easing - £375 million.

This outcome had been widely predicted by commentators in the run-up to January's monthly meeting, which took place over two days this week.

David Kern, chief economist at the British Chambers of Commerce, was among the experts to back the decision - describing it as "correct" in light of current economic conditions.

"Our members do not support some of the current gloom about the economy, despite of the possibility that growth will slow sharply in Q4 2012," he stated.

"Given these circumstances, we believe that pressures for more quantitative easing should be resisted."

Mr Kern said additional cash should only be injected into the economy if new threats emerge to the stability of the UK banking system.

"We believe further quantitative easing would provide only marginal benefits for the real economy, while heightening longer-term risks of financial distortions, bubbles and higher inflation," he noted.

Posted by Steve Williams