Three years of extremely low interest rates will slide past today with little sign that the Bank of England is set to ease up on its emergency support.
Economists think rates will remain at 0.5% until the end of next year and possibly for as long as three more years, adding to the pain for savers. They seem to be following the guideline of the US Federal Reserve who announced their policy of maintaining low interest rates until the end of 2014.
On the third anniversary of its decision to cut rates to an all time low, todays meeting of the bank’s monetary policy committee is expected to be low key, with no change expected in rates or its ‘money-printing’ program.
The QE policy adopted last month was also unleashed three years ago and received a further injection of £50 billion growing to £325 billion, despite pushing up inflation rates.
The Bank of England offered no surprises in today’s announcement, keeping its key lending rate at a record low, where it’s stood close to 1000 days while making no changes to its quantitative-easing program already in practice. Policymakers also voted to make no changes to the size of the bank’s asset-purchase program, the centerpiece of its quantitative-easing strategy, after boosting the program by 50 billion pounds ($78.8 billion.
The European Central Bank said they will keep the current lending rate unchanged. At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively.
The panel “has spent the past two years wrestling with the proven fact that although inflation appeared stuck well above the two percent target, the base weakness in the economy meant there were reasons to fret that inflation would become entrenched at ‘too low’ a level in the medium term” Now, with inflation beginning to decline and the committee’s forecasts highlighting fears inflation could fall below target, there seems to be “no powerful momentum behind further policy loosening,” Hayes announced. Annual inflation came in at 3.6% in Feb, down from a top of 5.2% last Sep. Industrial activity over coming months is probably going to be rocky nonetheless, and will dictate policy.
Policy makers will be closely watching the euro-zone to work out if the current stabilizing in the of the crisis can be maintained, strategists said. Council members also need to permit time for the Greek rescue to become effective and also to have enough time to breathe as the markets, judiciary, economic experts and stockholders have been pushed to their limits. The wait and see policy is the very best at this time.
Draghi, in the meantime, is predicted to take a wait-and-see approach after the completion last week of the ECB’s 2nd, three-year long-term refinancing operation, or LTRO. The near term loans program last week saw eight hundred banking establishments borrow some 530 billion euro ( $700.3 billion ) in three-year loans fixed to the ECB’s one percent refi rate. It followed the ECB’s first-ever three-year LTRO in December. The quantity of participation was more than the markets had predicted.