Economic Update - Q2/2010

Interest rates will remain at a record low for a 12th consecutive month. The Bank of England's Monetary Policy Committee has decided to freeze the base rate at 0.5 per cent, while also keeping its quantitative easing programme on hold.

Interest rates have been at 0.5 per cent since last March, as the Bank has attempted to encourage an increase in consumer spending. Last month, it said it was halting its programme of quantitative easing, which has pumped £200 billion into the economy over the last year. However, it revealed that the initiative could be extended in future if such a move is deemed necessary.

According to Gareth Osborne, the Bank's decisions had been widely forecast and were the inevitable outcome given the uncertain position. "We expect the Bank of England to keep interest rates low throughout 2010 given recurring concerns about the strength and sustainability of the recovery," he added. "We still have some way to go before we can be sure the economy isn’t going to regress again. We should be happy for now that there are some signs of improvement and not be too surprised if we see mini highs and lows for some months to come.”

The unemployment rate now stands at 7.8% - unchanged over the quarter but up 1.4% on last year. Nearly 29 million people were in work in the period October to December according to the labour force survey (LFS). The number of people employed was down by 12,000 this quarter and down by 428,000 on the last year. The US unemployment rate is currently 9.7%.

Gareth, APA.