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UK base rates held at 0.5%

It has been revealed in the last hour that UK base rates are to be maintained at 0.5% with the likelihood that we have reached the bottom of the interest rate cycle. Despite rumours of unrest within the MPC it appears that the vast majority are of the belief that quantitative easing is the way forward in the short to medium term and the benefits of interest-rate reductions have been exhausted.

Interestingly, the Bank of England has also confirmed that £26 billion worth of " quantitative easing funds" have been used within the first month of the program with the £75 billion limit (although there were rumours of a £150 billion limit) set to be hit within two months. However, we have yet to see any significant benefit from both interest-rate reductions and the quantitative easing program although the Bank of England appears confident that results will show through in the short to medium term. This is perhaps the most upbeat comment by the Bank of England during the last 12 months.

The next few days are vital as the reaction of the money markets and stock markets around the world will be monitored carefully. Whether we are actually on the verge of a turnaround in the UK economy, in the short to medium term, is very much open to debate but the Bank of England appear to be fuelling hopes of recovery.

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