The Bank also says it will also continue with its £175bn quantitative easing scheme but will not extend it this month.
Last month the Monetary Policy Committee injected £50bn into the economy to create up to £175bn on the UK's balance sheet. As of September 3 some £140bn worth of assets had been purchased under the QE scheme. This is a colossal amount of money being poured into the economy and would typically lead to roaring inflation, but with little or no inflation in the economy this illustrates the scale of the problem we are in.
The MPC expects the QE programme to take another two months to complete, with the scale of the programme continuing to be kept under review. The governor of the Bank of England, Mervyn King, stated that QE would take six months before it was possible to assess whether it was working, and those six months are now up.
On the positive side, QE has depressed gilt and corporate bond yields and as a consequence has boosted UK equities, although it is difficult to quantify how much money investors have switched into shares from gilt sales. But the FTSE is back to the levels last seen over 18 months ago and has risen almost 40% since last March.
But on the negative side, there have been few signs of an increase in bank lending with money from gilt sales remains stuck in the banking system. Net lending in July 2009 fell at its fastest pace since records began in 1993.
The failure of the banks to lend can be attributed to the lack of solvency amongst the banks themselves, the fear of incurring more bad debts in weak economy, or the desire not to borrow on the part of indebted households and companies.
The Bank of England has held the bank base rate at 0.5% for the sixth month in a row.
The Bank also says it will also continue with its £175bn quantitative easing scheme but will not extend it this month.
Last month the Monetary Policy Committee injected £50bn into the economy to create up to £175bn on the UK's balance sheet. As of September 3 some £140bn worth of assets had been purchased under the QE scheme. This is a colossal amount of money being poured into the economy and would typically lead to roaring inflation, but with little or no inflation in the economy this illustrates the scale of the problem we are in.
The MPC expects the QE programme to take another two months to complete, with the scale of the programme continuing to be kept under review. The governor of the Bank of England, Mervyn King, stated that QE would take six months before it was possible to assess whether it was working, and those six months are now up.
On the positive side, QE has depressed gilt and corporate bond yields and as a consequence has boosted UK equities, although it is difficult to quantify how much money investors have switched into shares from gilt sales. But the FTSE is back to the levels last seen over 18 months ago and has risen almost 40% since last March.
But on the negative side, there have been few signs of an increase in bank lending with money from gilt sales remains stuck in the banking system. Net lending in July 2009 fell at its fastest pace since records began in 1993.
The failure of the banks to lend can be attributed to the lack of solvency amongst the banks themselves, the fear of incurring more bad debts in weak economy, or the desire not to borrow on the part of indebted households and companies.