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Bank of England MPC set to maintain base rate at 0.5%

January's meeting of the Bank of England MPC is widely expected to see little change in the current policy with base rates set to remain at 0.5% and the quantitative easing program unchanged at £200 billion. However, there is a feeling that February could well be a crunch meeting for the MPC with a suggestion that inflation is starting to come to life, the manufacturing industry is improving but slowly, construction has yet to recover and the signs from the retail sector are mixed to say the least.

It is widely believed that in private the Bank of England is concerned about the current state of the UK economy and the fact that despite massive fiscal stimulus programs there has been little real improvement over the last few months. While many expect the UK to have moved out of recession in the final quarter of 2009, the government was suggesting this would happen in the second and third quarters of 2009 only to disappoint investors.

In many ways the government and the Bank of England are powerless to turn around the massive UK economy in the short term having already pumped billions upon billions of pounds into the system with little return as yet. Whether this investment has formed a base from which the economy can grow remains to be seen but there are still concerns in many quarters.

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