Interest rates remain at 0.5%
Thursday, 10 February 2011 03:14
The Bank of England has maintained the base rate at 0.5 per cent for the 23rd consecutive month after the meeting of the Monetary Policy Committee (MPC) earlier today (Feb 10th).
The news was widely expected following a succession of negative financial announcements in the last few weeks as the Bank of England attempts to shelter homeowners against further increased costs.
The CBI today responded to the announcement from the Bank of England's Monetary Policy Committee (MPC) that it will keep interest rates the same.
Ian McCafferty, CBI Chief Economic Adviser, said:
"This announcement to keep rates the same is not a surprise, but with more MPC members showing their concerns about inflationary pressures, the Bank is in the process of shifting its stance.
"Looking beyond the recent surprising GDP data, the CBI still predicts growth in 2011, albeit modest, but recent indicators suggest that the inflation outlook has worsened.
"We expect the Bank to start preparing the ground for a gradual normalisation of monetary policy around the second quarter of the year."
Initial GDP figures for the last quarter of 2010 showed that the UK economy shrank by 0.5 per cent and yesterdays report from the Office for National Statistics showed that the trade gap between exports and imports is widening which contradicts the Governor of the Bank of England, Mervyn King’s stated aim that the UK economic recovery will be led by increased exports.
Director General of the British Retail Consortium, Stephen Robertson, said: "Continuing the freeze on interest rates is a wise move. At a time when consumer confidence is weak and the housing market is slow, raising rates could only have done harm.
However, the problem of rising inflation remains but the MPC has decided against increasing interest rates this month. It remains to be seen if there was division between the committee of nine as there was in January when two voted to increase interest rates and one member voted to increase the amount of quantitative easing.
The decision is bad news for savers who will see little or no increase in rates available for savings as we head towards the ISA deadline.
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