Stability the key as MPC leave rates unchanged
May 10 2010 by Alun Thorne, Birmingham Post
A swift political decision is fundamental for economic stability, West Midlands business leaders said as the Bank of England’s Monetary Policy Committee (MPC) decided to keep interest rates at 0.5 per cent.
Paul Bassi, president of Birmingham Chamber of Commerce and Industry (BCI), said: “Monetary policy and fiscal policy come hand in hand and while the political situation remains unclear, the MPC has little room for manoeuvre. So the decision to keep interest rates and leave quantitative easing unchanged was expected.
“Economic recovery slowed in the first month of 2010 which emphasises the fragile state of the economy. GDP rose by just 0.2 per cent, a drop on the 0.4 per cent recorded in Quarter 4 2009.”
Simon Topman, chairman of the West Midlands Chamber of Commerce, said: “The current political situation cannot continue without having a dire effect on the country’s economy. Speed on the political front is essential.”
The Bank’s Monetary Policy Committee (MPC) voted to hold rates at 0.5 per cent and left its £200 billion programme to boost the money supply unchanged.
The widely-expected decision came as European leaders agreed to prop up the euro and prevent Greece’s sovereign debt crisis from spreading - while talks over a possible coalition continue following last week’s indecisive election.
Despite worries over inflation, the current political and economic uncertainty will have reinforced the MPC’s “no change” stance with the UK making a fragile recovery from recession.
Rate-setters have failed to budge policy since November and are unlikely to move until repair plans for the UK’s public finances have been set out by a new Government and the economy shows signs of stronger growth.