Business leaders in the region have expressed their disappointment that the Bank of England’s quantitative easing programme has come to a halt.
The decision was announced by the Monetary Policy Committee as interest rates remained at 0.5 per cent.
The Bank has so far pumped £200 billion in newly-created money into the economy after finishing its latest round of assistance last week. Some economists predict that the Bank will keep the door open to more QE if the economy continues to struggle.
Will Rogers, policy advisor at Birmingham and Solihull Chamber of Commerce and Industry (BCI), said: “Although the decision to bring the £200 billion programme to an end is not surprising, the economy is still fragile. A significant boost of another £25 billion would have encouraged further business investment.
“The economy has only just achieved a 0.1 per cent growth, when experts predicted it was expected to reach 0.4 per cent. There are signs of recovery, but they are fragile. Manufacturing activity has recently hit a 15-year high but positive figures like this need to be sustained.
“Now is the time for organic growth, which is not helped by placing additional pressures on business through rate increases.”
The Bank of England’s decision to keep interest rates at 0.5 per cent was welcomed by Black Country Chamber of Commerce.
Peter Mathews CMG, President of Black Country Chamber said “The bank of England is correct to keep interest rates on hold. This decision will enable the UK to maintain price stability and therefore economic stability.
“The latest GDP figures indicate that we are officially out of recession, but many businesses are expecting a difficult start to 2010, so it is imperative that we maintain a relatively low interest economy to support growth and a sustainable recovery. It is unfortunate that the Bank of England has halted the quantitative easing programme, as this is designed to boost the economy.
“We are clearly not out of the woods yet, and the Monetary Policy Committee must take a long term view when making interest rate decisions and it is crucial that any rate increases in the future are slow and gradual and do not change dramatically in the near future.”
“With the economy out of recession, albeit by the skin of its teeth, the MPC felt that the considerable monetary stimulus already in place should be enough to support the recovery. While the door has been left ajar for a resumption in asset purchases in the future, should the need arise, all signs point to a winding up of the programme.
“Key to the decision for the MPC will have been the inflation outlook. Some MPC members have been making rather hawkish comments recently, suggesting that concerns about inflation are increasing.
“However the recovery is still at a delicate stage and, after some short-term volatility caused by the VAT increase and higher fuel prices, we expect inflation to drop below target for a prolonged period of time. And with fiscal tightening in prospect, we envisage interest rates to remain at 0.5% until early 2011 by which time the recovery should be on a much firmer footing.”