The Bank of England has announced the Monetary Policy Committee decision to keep interest rates at the record low of 0.5 per cent.

The widely anticipated decision to keep rates at 0.5 per cent and leave the quantitative easing programme unchanged will, however, lead to continuing speculation that there will be a change in monetary policy before the end of the year.

It is expected that the Bank’s programme of purchasing high-quality assets in the market to boost available funds in the financial system – quantitative easing – will be increased from its current £200billion level.

Despite high inflation, fears about the sustainability of the economic recovery persist with some division in the MPC on whether rates should be gradually increased or whether the economy requires boosting with further quantitative easing.

Earlier on 7 October, the Office for National Statistics published data for the UK’s rate of production and manufacturing.

The seasonally adjusted figures to smooth out any known spikes or drops in data caused by seasonal events, showed an increase in production and manufacturing for August 2010 compared to August 2009.

The ONS said the index of manufacturing rose by six per cent compared to August 2009.  Year on year figures showed this was the ‘strongest picture since December 1994.’

The index of production measures the volume of production of the manufacturing, mining and quarrying, and energy supply industries. It is used as a short-term economic indicator and contributes to the measurement of gross domestic product (GDP).

The FSTE 100 was up at lunchtime on 7 October. Some retailers, including Marks & Spencers, were trading higher after posting positive results for the second quarter of 2010.

© Fair Investment Company Ltd