Bank of England could increase monetary supply

February 2, 2009 by Brendan

News

As reported in yesterday’s article, this week the Bank of England’s Monetary Policy Committee is set to meet this week to determine how best to assist the economy. Rumours are rife that the MPC is likely to reduce the interest rate to just 1 per cent, which will please many people on a tracker rate mortgage, however, they also have another monetary tool at their disposal.

As confirmed in an exchange of letter between the Chancellor and the governor of the MPC in recent weeks, the Bank of England is able to increase the monetary supply if it so wishes.

This has been proclaimed by many experts as a sign that the interest rate is most definitely set to be cut and it is just a matter of when rather than if. If this does prove to be the case, then the interest rate cut to 1 per cent will be another historic low.

Despite signs of mortgage approvals increasing slightly in December, the media is still full of dismal news of the UK’s recession and dismal news from the US of their own struggles has meant that the UK is unlikely to receive a boost from overseas trade at this point in time.

The only good news from this recession is that those first time buyers who were wondering if they would ever get on the property ladder and had been saving as frantically as possible could be lucky now as property prices remain low.