Commenting on today’s Monetary Policy Committee (MPC) decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
"Following last month’s welcome decision to increase quantitative easing to £175bn, we are not surprised that the MPC has chosen to persevere with the current programme and keep interest rates at 0.5%. However, persistent weakness in lending to businesses, particularly to small firms, poses serious risks to the early signs of economic recovery.
“As a temporary measure, the MPC should consider cutting the interest rate paid on deposits kept by commercial banks at the Bank of England, and in some circumstances make this rate negative. This might discourage hoarding of cash and encourage the banks to lend more.
"Positive signs of recovery cannot obscure the risks of a relapse. The economy is still very fragile and the productive sector is vulnerable. We urge the MPC to raise the QE programme to £200bn and to purchase more company debt.”