Bank of England maintains interest rates


10th of February, 2011 Bookmark and Share
At 12 noon today, the Bank of England has again maintained interest rates at 0.5% for the 23rd consecutive month in a row. The historical rate is the lowest on record since the Bank was founded in 1694.

The decision to hold the rate was widely predicted, despite continuing worries about inflation. The Guardian reported this morning, that the monetary policy committee (MPC) is coming under increasing pressure to take action, given inflation is almost twice the 2% target.

The Confederation of British Industry yesterday announced that is expects inflation to remain "stubbornly high" this year, due in part to the impact of higher VAT rising energy and commodity prices. The CBI predicts rates will hit 1.25% by December 2011, rising to 2.75% in 2012 and there is now a general consensus building that future rate rises are likely to be imminent.

City economists had predicted there was a 20% chance ( 1 in 5) of a rate hike today, but believe a move is more likely later in the year. While money markets have fully priced in a rate rise by May, resulting in more expensive fixed rate mortgages, only 21 out of 67 analysts polled by Reuters think rates will go up before the fourth quarter.
David
David Rostron