New governor but no change for interest rates

A CHANGE of governor at the Bank of England has failed to have any impact on interest rates.

Mark Carney took over from Sir Mervyn King this week and cast his first vote at a Monetary Policy Committee meeting today, but the Bank’s policy on rates and quantitative easing remained unchanged.

MPC members erred on the side of caution again and opted to hold rates at 0.5% and maintain the asset purchase programme – quantitative easing – at £375bn.

Last month the Bank warned that “significant” numbers of people could face financial problems if interest rates were to rise. It said households accounting for 9% of mortgage debt would need to take action if rates rose by 1% to 1.5%. This figure would double if there was a 2% hike.

Many observers interpreted this statement as an attempt by the Bank to prepare mortgage holders for future rate rises, or at least as a reminder that the cost of borrowing will not stay this low forever. It has held rates at 0.5% since March 2009.

Sara Fowler, EY’s senior partner for the Midlands, commented: “Interest rates staying at a consistently low level has allowed businesses to plan for future capital investment with the relative security of low repayments. As well as investing in their own domestic markets, businesses across the region also need to focus investment plans on developing trade links with fast growing emerging markets where the biggest opportunities exist for growth.”
 

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