MPC unanimous on interest rates

The minutes from the last meeting of the Bank of England's monetary policy committee have been released and show that all nine members of the MPC were in favour of retaining UK interest rates at 0.5%. This is despite the fact that UK inflation has increased to 3.5%, above the government's target, although there were a number of comments regarding a weakening sterling and the potential to feed the monster which is inflation.

It also appears that all members of the MPC were in favour of suspending the quantitative easing program amid speculation that the authorities may well reintroduce it if the UK economy shows any signs of weakness in the short term. It is noticeable that the Bank of England has become more negative on the outlook for the UK economy for 2010 due to inflation, liquidity issues in the mortgage market and the ever-growing threat of a weak currency. There is an argument as to whether we need pre-emptive action to support the currency now or whether it needs to find a natural level from which the UK economy can build and start to grow. Whatever happens during 2010, there is no doubt that the next few months will be vital not only for the UK government but also the medium term direction of the UK economy.