Banks react to MPC rate hold decision


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The Monetary Policy Committee's (MPC) decision to hold the base rate at 0.5 per cent yesterday (December 8th) sparked a flurry of comments from the financial trading and consumer banking sector, in a week when all eyes seem focused on the EU summit that looks to deal with the eurozone debt crisis.

There was also reaction to its statement that the asset purchase programme would remain at £275 million.

Independent mortgage adviser John Charcol said the MPC may need to employ various measures before the next interest rate meeting takes place in order to stimulate the economy – and a cut this month may have helped to reduce the cost of borrowing for consumers who have loans and other borrowings linked to the base rate.

However, the Bank of England's decision to make no changes to the quantitative easing strategy made more sense, John Charcol added.

Equally, the Norwich and Peterborough Building Society said it was widely expected that the interest rate would remain at 0.5 per cent. Global and national economic instability continues to be the main factor in the committee's mind when it reaches a conclusion every month, remarked Yorkshire group treasurer Chris Parrish.

Santander commented on the European Central Bank's role in the process moving forward, following the eurozone meeting this week.

"While the MPC again voted for no change in Bank Rate today, the financial markets focus will really be on the European Central Bank with the markets expecting a further rate cut although this is not guaranteed. Attention will also be focused on the post-MPC meeting press conference," stated Barry Naisbitt, chief economist of Santander UK.

The asset purchase programme is expected to take another two months before it is completed, the Bank said.

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