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MPC set to end 2009 with caution

The Bank of England's Monetary Policy Committee (MPC) is expected to end 2009 on a cautious note with no change in interest rates and no change in the amount of funding available to the quantitative easing program. Despite the fact a number of prominent economists have suggested that the UK economy is "moving in the right direction" there are still concerns regarding the short to medium term performance and the potential difficulties which could follow if funding is withdrawn or interest rates are increased.

The Bank of England has already spent in the region of £200 billion on the quantitative easing program and while there has been a marked increase in money market activity it has been less than many had expected. It is unlikely that we will see, at least in the short term, any increase in the quantitative easing program although if there are any unforeseen circumstances in the short to medium term this could change.

Despite positive hopes for the UK economy in the immediate future there is still much scepticism regarding the strength of any potential recovery and indeed the fragile nature of consumer confidence and business confidence. Against this particular backdrop it is unlikely we will see any significant change in economic policy over the coming months.

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