Bank of England keep interest rates on hold at 0.5%

In a scheduled announcement, the Bank of England has kept interest rates on hold at 0.5%. The central bank was widely expected to keep interest rates on hold following their unprecedented monetary easing since October last year. Despite the base rate remaining at a historic low, and a quantitative easing strategy already being deployed, credit conditions remain tight in the UK for business’s and individuals alike. We expect that the Bank of England will have used up the initial £75bn of new money by the end of this month and will begin the process of using the additional £75bn limit agreed by chancellor Alistair Darling.

We expect the pound to trade within a narrow range initially, as investors turn their attention to the European Central Bank’s interest rate decision due in approximately 45 minutes. In the longer term the Caxton FX analysts feel that the pound may gain some value against the single currency as economic news remains particularly soft in the eurozone. In addition, the European Central Bank has been slower with their interest rate cuts, and are expected to turn to more unconventional measures such as those currently being employed in the US and the UK.