Bank of England maintains interest rates at 0.5 per cent
The Bank of England’s Monetary Policy Committee (MPC) has voted to maintain the base interest rate at 0.5 per cent for the 24th consecutive month.
The news will come as a relief to homeowners whose repayments will not increase for the time being but is a further blow to savers who will not benefit from an increase in rates.
The pressure to raise rates has been ramped up in the last few months because of the big increase in inflation. At the last measure, inflation for January had risen to four per cent, double the level aimed at by the Bank of England, increasing the pressure for a rate rise.
However, recent bad economic news, in particular, the news that GDP for the last quarter of 2010 fell by 0.6 per cent, rising unemployment and uncertain property market data has balanced out calls for a rate rise to deal with rising inflation rise as it may damage the fledgling recovery.
Consumer confidence is at a low ebb and is likely to remain so for the rest of the year. That is one factor that has influenced the decision to keep base rate at 0.5 per cent for another month.
With domestic spending likely to remain subdued it is possible that inflation will fall due to a natural lack of spending and cash in the system. Many commentators are saying that we need lower interest rates for the next twelve months.
The MPC voted 6-3 to keep rates at 0.5 per cent last month. In January they voted 7-2. Last month, Spencer Dale joined his colleagues Andrew Sentence and Martin Weale in calling for a rise in interest rates to help dampen inflation levels. It will be interesting to see what the breakdown in the voting between members of the committee was this month.
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