Bank of England keeps interest rates and stimulus unchanged

The Bank of England said today that its Monetary Policy Committee (MPC) has voted to maintain interest rates at 0.5% and also resisted calls to inject more money into the economy to help stimulate recovery.

Rates have now been held at their record low level for four years.

At the February meeting of the rate-setting committee, Bank of England governor Sir Mervyn King and two others voted to increase the quantitative easing (QE) programme by GBP25bn to GBP400bn but they were outvoted. Some economists were expecting the bank to expand QE at the MPC’s March meeting.

This morning’s announcement was supported by the British Chambers of Commerce (BCC), whose chief economist, David Kern, expressed disappointment that the pressure for further bond-buying is mounting. “We believe this would be misguided, as more QE would provide only marginal benefits for the real economy, while heightening risks of financial distortions, bubbles and higher inflation,” he added.

Business group the CBI agreed that the prospect of further QE remains. Its director of economics, Stephen Gifford, said that the decision this month is likely to have been a close call.

With the UK economy shrinking again in the final quarter of 2012, all eyes are on the economic data emerging in the first quarter for signs of growth or contraction.

A new survey released today by EEF, the manufacturers’ organisation, and business advisers BDO shows that conditions in the manufacturing industry remain around a three-year low but the outlook is brighter. There are signs that manufacturers could see conditions turn around in the second quarter, with output and order balances expected to recover back to levels seen in the early part of last year.

Also today the BCC published its latest forecast for the UK economy, downgrading its prediction for growth in 2013 to 0.6% from the earlier expectation of 1.0% growth. Similarly, the organisation now expects the economy to grow by 1.7% in 2014, a reduction from the earlier figure of 1.8%.

Commenting on its revised outlook, the BCC said that UK businesses are resilient and have the ambition needed to drive the national recovery forward, but reduced global growth prospects, particularly in the eurozone, together with the ongoing need to repair Britain’s public finances, mean that the pace of the UK recovery will be restricted over the next couple of years.

Bank of England reports continued rise in mortgage approvals

Further signs are emerging of a recovery in the UK housing market, as the Bank of England said today that mortgage approvals rose again in December 2012.

The number of loan approvals for house purchases climbed to an 11-month high of 55,785, increasing for the fifth month in a row.

Analysts believe that the revival in the market is an indicator that the government’s Funding for Lending Scheme (FLS) has been successful in boosting lending. The scheme was launched at the start of August 2012 and was designed to encourage lending to households and growing businesses by allowing financial institutions to borrow at low interest rates.

Since the launch of FLS the number of mortgages on the market has increased and lenders have been reducing their mortgage rates, according to personal finance website This is Money.

Separate figures released today by the Building Societies Association show that, over the whole of 2012, mortgage lending by building societies and other mutual lenders grew to a total of GBP30.7bn. This is a 30% increase compared to the prior year.

Mutuals also represented a larger share of the overall lending market, taking a 22% market share of total new lending in the year, up from 17% in 2011. In December, total lending by mutuals increased to GBP2.4bn from GBP2.1bn a year earlier.

Adrian Coles, director-general of the Building Societies Association, said that mutual lenders such as building societies are likely to continue to play a prominent role in the mortgage market in 2013 and he pointed out that more than half of the 35 firms that were signed up to the Funding for Lending Scheme in December are mutuals.

Last week the Council of Mortgage Lenders (CML) reported that gross mortgage lending in December reached an estimated GBP11.7bn, taking the estimated total for the year to GBP143bn, up from GBP141bn in 2011. In the coming year the organisation forecasts that gross lending will reach GBP156bn.

The CML represents banks, building societies and other lenders who provide a combined 95% of all residential mortgage lending in the UK.

Bank of England keeps interest rates at 0.5% and holds back from further QE

The Bank of England has maintained UK interest rates at 0.5% and also announced yesterday that it will not be extending its programme of quantitative easing (QE).

Rates have been held at a record low of 0.5% for three years.

Economists said that the decision by the Bank of England’s Monetary Policy Committee (MPC) was likely to have been close. Ian McCafferty, the CBI’s chief economic adviser, commented that another round of QE could not be ruled out but noted that the recovery is expected to be on a firmer footing in the second half of the year, as inflation eases and the global economy strengthens.

Minutes from last month’s MPC meeting showed that members of the committee were becoming more concerned about inflation, with the Consumer Prices Index (CPI) measure rising to 3.5% in March, from 3.4% in February. The Bank of England’s target rate for CPI inflation is 2% but it has been higher than this for 28 months, and according to the Telegraph most economists no longer believe that it will fall to 2% before the end of the year.

The minutes from April’s meeting also revealed that one member of the committee dropped his vote for more QE. This scheme, which is intended to boost the economy through buying bonds, was boosted to GBP325bn in February.

Confirmation that the economy appears ready to grow again came yesterday in a new report from the OECD, which said that the UK’s composite leading indicators – designed to anticipate turning points in economic activity – are showing stronger positive signals compared to the previous month’s assessment.

Bank of England order sale of £50 note tissues to stop

The Bank of England has banned a gift stop selling novelty tissues which look like £10 and £50 notes – in case people try to pass them off as real money.

The floppy pocket tissues featuring the designs of £10, £20 and £50, notes are being sold on eBay in packs of ten for 99p.

But stuffy bosses at the Bank of England have ordered gift shop Bright Ideas to remove them after claiming they breach forgery laws.

Sarah Neale, who runs the shop in Melton Mowbray, Leics., started flogging the fun tissue notes online at the beginning of this month but was ordered to scrap them last week.

Sarah, 50, said: “It’s just ridiculous. I was gobsmacked.

“I couldn’t believe it when I got the email.

“We said in the title that they were novelty bank note tissues and stated they were not real currency.

“It’s obvious that they’re novelty tissues.

“It’s just so stupid. They don’t look real at all – they are not even the right size. They are very thin paper tissues. It is such a big surprise to us.

“I was told our listing wasn’t against eBay’s policy but they told us they had been instructed by the Bank of England to remove them.

“Surely the Bank of England has better things to do than this.”

The online auction site was contacted by the Bank of England and the product was removed from sale as it breached its policy on counterfeit money and stamps.

Sarah, who has been running the shop with her husband for five years, added: “Quite a few of our customers have commented on it.

“We’ve even had one regular customer who sent us an email asking if he could pay for a little figurine with the paper tissue money.

“Other companies sell beach towels in the same design and serviettes – they don’t look real at all. They are so small.

“They are three ply, single-sided tissues. There’s no way someone could get away with passing them off as real.”

The tissue bank notes measure the same as the originals but are only printed on one side.

The shop only started stocking them at the start of March and have only got five packets left out of 36.

They are still on sale in the shop as the Bank of England has not directed them to be removed from sale.

A Bank of England spokesman said: “Under section 18(1) of the Forgery and Counterfeiting Act 1981 it is a criminal offence for any person, without the prior consent in writing of the Bank of England, to reproduce on any substance whatsoever, and whether or not on the correct scale, any Bank of England banknote or any part of a Bank of England banknote.

“The images on the tissue products in question fall within the Act, and because we have not given permission for our copyrighted images to be used in this way we have asked eBay to remove them from their site.”