UK interest rates remain on hold

The Bank of England's rate-setting committee has kept UK interest
rates on hold at 0.5 % for the seventh successive month, as widely
expected. The Bank also said it would continue with its programme of
pumping £175 bn into the economy, which it said would likely take
another month to complete. Interest rates remain on hold as data
continues to show that any UK economic recovery remains patchy.
Figures out later this month could show that the UK has exited
recession. 'No risks' The Bank added that it would keep the scale of
its programme of expanding the amount of money in the economy, a
policy known as quantitative easing (QE), "under review". " Where
there is uncertainty is about what happens next month, when the
committee has a new set of inflation report forecasts and the Bank
of England will have met the current QE target " Philip Shaw, UK
economist at Investec Back in August it announced that the funds in
the scheme would be raised to the current £175 bn level from £125 bn.
Analysts were in agreement that the key issue was now whether QE does
end next next month, or whether the Bank's Monetary Policy Committee
announces after its October meeting that it will be extended. "It is
as yet early days in gauging the effect of the QE programme so far,
but companies are still facing serious constraints in their financing,
so the Bank must take no risks in ending the programme prematurely,"
said CBI chief economic adviser Ian McCafferty. Philip Shaw, UK
economist at Investec, said the Bank's latest rates decision was
"highly predictable". "Where there is uncertainty is about what
happens next month, when the committee has a new set of inflation
report forecasts and the Bank of England will have met the current QE
target." Weak industrial output Many commentators have said that the
economy probably expanded during the July-to-September period, citing
rising house prices and a big rise in car sales - despite the later
being helped by the government's scrappage scheme. However, official
figures showed earlier this month that UK industrial output fell
unexpectedly in August, declining 2.5 % from July. This prompted the
National Institute of Economic and Social Research think tank to
predict that the UK economy failed to grow in the third quarter. The
official figures will be released by the Office for National
Statistics on 23 October. The economy contracted 0.6 % between April
and June, following a 2.4 % decline from January to March.