Bank keeps interest rates at 0.5%

The Bank of England has kept interest rates on hold at 0.5%, in a widely expected move following a number of rate cuts in recent months.

Rates remain at an all-time low after six cuts since October last year, when interest rates stood at 5%.

The Bank is also continuing with quantitative easing, or creating money to help boost lending. It has so far injected £26.4bn into the system.

The Bank and the government are trying to ease the economy out of recession.

New policies

As well as keeping rates on hold, the Bank’s Monetary Policy Committee also voted to continue with “the programme, announced on 5 March, of asset purchases totalling £75bn financed by the issuance of central bank reserves”

With rates already so low, the Bank has been forced to look at other policies to boost the economy.

This is why it introduced quantitative easing – buying assets such as government and corporate bonds to increase the supply of money in the economy, in the hope that banks will eventually find it easier to lend to companies and individuals.

John Cridland, CBI deputy director general, said: “It is too early to judge quite how quickly this will begin to affect the broader economy.

“But the first tentative signs of the impact on gilt yields, corporate spreads and commercial paper issue have been encouraging.”