Today’s decision by the Bank of England’s Monetary Policy Committee to hold interest rates steady at 0.5% and maintain the size of the Quantitative Easing (QE) programme at £325bn was widely expected, according to the Derbyshire and Nottinghamshire Chamber of Commerce.
Commenting, Chamber Chief Executive George Cowcher said: “Weak growth prospects, both globally and in the UK, will make it necessary to keep interest rates at their current low levels for much longer than previously envisaged and we would expect them to remain at 0.5% until the final months of 2013. Following last month’s increase in QE, there was clearly no case for another increase in March.
“Whilst Quantitative Easing will help to underpin financial stability in the UK, the Chamber is concerned that it has still not led to meaningful increases in lending to businesses, which has limited the benefits to the real economy.
“Many lenders have pushed up their mortgage rates in recent days, which is clearly a problem and the Chamber would urge the Chancellor to introduce an effective credit-easing scheme in his forthcoming Budget to address this issue. The MPC needs to play its part by considering the inclusion of assets other than gilts, such as securitised SME loans and mortgages, in the QE programme.
“The UK could also learn from the recent success of the European Central Bank providing large amounts of longer-term cheap funding to banks. Similar measures in the UK would make banks less risk averse and stimulate the flow of lending to viable businesses.”
