Rates held at 0.5% again

THE Bank of England today opted to hold interest rates at a record low for another month.

The Bank has faced growing call for a rise to curb inflation and one member of the Monetary Policy Committee, Andrew Sentance, has voted in favour of a 0.25% increase.

The MPC also opted to leave quantitative easing at £200bn.

Mr Sentance – who is known as the MPC’s leading hawk – has said he believes there is enough positivity in the economy to absorb a rate hike. Inflation has been above the 2% target since last November and is currently at 3.4%.

Interest rates were cut to 0.5% in March 2009. Just three years ago, at the height of the bull market, the cost of borrowing was 5.75%.

Business groups welcomed the widely-anticipated move.

Graeme Leach, chief economist at the IoD, said: “The case for an interest rate rise or reversal in quantitative easing was pretty feeble.

“Yes – second quarter GDP growth was good, but that is likely to be as good as it gets in this recovery. Broad money supply growth does not suggest a sharp recovery is underway, and until it does, we think the MPC should hold fire.”

Dr Brian Sloan, head of business and economic policy at Greater Manchester Chamber of Commerce, agreed, but expects rates to rise before much longer.

He said: “Although inflation remains a problem we believe the bank was right to maintain rates at 0.5% today, though we cannot ignore the growing case for interest rate rises sooner rather than later. “

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