Interest rates held again
INTEREST rates were held by the Bank of England at 0.5% today.
It is the 13th month in a row the Bank’s Monetary Policy Committee have decided against changing the rate and keeping them at their record low.
The MPC also decided against altering the £200bn it has so far spent on quantitative easing (QE), or printing money, to support the economy.
Recent figures showed that the UK moved out of recession faster than originally thought in the fourth quarter of 2009. But economists believe there could still be bumps on the road to recovery, while the looming General Election may also play a part in a decision to keep things as they are.
Meanwhile, the fall in February’s rate of inflation to 3%, from 3.5% in January, has soothed concerns about pressure on the Bank for rate hikes.
Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club, said: “The raft of healthy data and survey results in the last few days as well as the upward revision to Q4 GDP growth made it highly unlikely that the MPC would have loosened monetary policy further from its already accommodative stance.
“At the same time, there is no question of any monetary tightening in the short term. Although inflation is at 3% – well above the 2% target – it is now on a downward trend.
“Given the fragility of the recovery, particularly with fiscal tightening on the horizon, we expect interest rates to remain at 0.5% until early 2011 by which time the economy will be more able to withstand tighter monetary conditions.”
Lai Wah Co, CBI head of economic analysis, said: “We weren’t expecting the Bank to change interest rates or its quantitative easing policy this month, as the MPC is waiting to see how the balance of risks to the economic outlook plays out.
“Growth in the economy looks to have held up over the first quarter, albeit at a slow rate, but there are still uncertainties about the strength and sustainability of the recovery this year.
“At last month’s MPC meeting, some members were more concerned about the upward risk to inflation from higher energy prices and weak Sterling, so it will be interesting to see how the Bank re-evaluates its inflation outlook when it publishes new forecasts next month.”
