Rate to be held, but consumers in debt may need more help, says expert

Consumers and businesses struggling with debt and the threat of a new recession may be helped by a new approach from the Bank of England, an economist has argued.

Chief economist at the British Chambers of Commerce David Kern said there is unlikely to be any change to policy when the Monetary Policy Committee (MPC) concludes its monthly meeting tomorrow (November 10th).

He stated: "Following the unanimous vote at the last MPC meeting in favour of increasing quantitative easing (QE) to £275 billion and keeping interest rates on hold, we do not expect any changes this week."

However, Mr Kern argued, more needs to be done to stimulate the economy in addition to QE and he suggested: "There is a strong case for it [the Bank of England] to help boost bank lending to businesses by immediately raising its purchases of private sector assets."

For those seeking debt consolidation measures, a new loan may be relatively cheap and stay so through the persistence of the 0.5 per cent base rate, in place since March 2009.

At the same time, however, a new economic recession may be of greater concern to many and lead to an increase in personal debt.

In its most recent decision, all nine MPC members voted in favour of the base rate hold and expansion of quantitative easing.

This was despite the fact that in October, just one member had said QE should be extended, although other members of the MPC were described in the minutes as being of the view that the case for extending the scheme would be stronger if negative economic trends remained.

Posted by Paul Thacker