Chamber and EEF comment on interest rates

The Bank of England has kept its stimulus programme of quantitative easing (QE) unchanged and also held interest rates at 0.5%.

The decisions were made at the first meeting of the Bank's Monetary Policy Committee since Mark Carney took over as governor from Sir Mervyn King.

Commenting on today's Monetary Policy Committee (MPC) interest rate decision, the first under the new Governor Mark Carney, John Ashcroft, Chief Economist at Greater Manchester Chamber of Commerce, said: “The decision to hold rates was widely expected. The economy is showing signs of recovery, confirmed by recent data including our own Quarterly Economic Survey and the important Greater Manchester composite indicator. It is too early to begin the programme of base rates rises, but it is time to say goodbye to QE as a policy option.

“The sooner long term gilt rates return to some semblance of normality, the better. The August meeting should be more interesting to rate watchers. Markets are looking for a statement on forward guidance and the future path of interest rates.

“Mark Carney must be careful not to make the same mistakes as Ben Bernanke, chairman of the Federal Reserve, and must avoid becoming hostage to a monthly data set.”

Commenting on interest rates, David Ost, North West Region Director at EEF, the manufacturers’ organisation said: “The Monetary Policy Committee has again held off from any further action, leaving interest rates and asset purchases on hold, which we expected. The more positive data we have seen over the past couple of months point to the economy slowly gaining ground, which clearly didn't sway votes for additional quantitative easing on this occasion.

"But the committee has tentatively stepped into forward guidance territory, giving the markets something to react to. Action will inevitably pick up in the coming months as the Bank sets out where the Committee goes from here, particularly in respect to signalling its future intent on policy.”