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Bank of England keeps interest rates flat

Bank of England keeps interest rates flat

Officials at the Bank of England have opted to keep interest rates the same yet again.

Debate is continuing to rage over when the right time will be to increase interest rates, but one thing is certain –it won’t happen this month.

The Bank of England (BoE) has decided to keep the base rate at 0.5 per cent yet again this month, marking 65 months in a row at this historic low. The existing quantitative easing programme is also set to stay the same at £375 billion.

This may not come as much of a surprise to commentators and analysts, but the really interesting question is whether the central bank still has a consensus on how to handle interest rates.

 

It will be another two weeks before the minutes of the meeting are published, but rumours are already circulating that this could be the first split decision for quite some time.

Reuters reports that a survey it conducted of its economists predicted the first split among members of the Monetary Policy Committee, which sets interest rates, would take place at the August meeting.

Strong employment and growth figures have continued to point towards an improving UK economy, and there has been speculation that BoE could raise rates sooner than has been expected.

 

But wages are only just beginning to catch up with inflation, putting consumer spending at risk. Meanwhile, business groups have warned against raising the cost of borrowing.

“The UK’s economic recovery remains on track but is still facing challenges and this is not the time to put it at risk with premature rate increases,” said David Kern, chief economist at the British Chambers of Commerce.

“The current calls for higher rates, particularly while wage pressures are still weak, are unjustified.”

City AM reports that November is thought to be the most likely time for an increase in rates.

Yael Selfin, economics director at KPMG, said that the central bank is likely to face a “big dilemma” in the autumn – caught between impressive employment data and consumer vulnerabilities while inflation is low.

 

 

< Top image: World Economic Forum >


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