The Bank of England’s Monetary Policy Committee has voted to maintain the official interest rate at 0.5 per cent, a decision which has been warmly welcomed by business lobby groups.
The Bank of England’s Monetary Policy Committee has voted to maintain the official interest rate at 0.5 per cent, a decision which has been warmly welcomed by business lobby groups.
The committee also voted to keep on hold the stock of asset purchases financed by the issuance of central bank reserves at £200 billion, the bank says in a statement today.
Ian McCafferty, chief economic adviser at the Confederation of British Industry, comments, ‘Given the recent mixed signals about the current strength of the economy, it is not surprising that MPC members have decided to keep interest rates on hold again.
‘While the recovery continues to make progress, recent economic data shows that it is very patchy across sectors, and some parts of the economy remain fragile. However, pipeline inflationary pressures have intensified, with our economic surveys showing rapid cost inflation from increased energy and commodity prices. Our view remains that the bank is likely to move away from the emergency 0.5 per cent rate later this year.’
Lee Hopley, chief economist at the manufacturers’ organisation, the EEF, adds that the ‘middling growth figures’ for the start of this year mean it is ‘unlikely’ the committee will raise rates in the first half of the year.
Hopley continues, ‘So long as the underlying economic recovery remains murky the case for a rate rise can’t be made until it becomes clearer.’
British Chambers of Commerce chief economist David Kern says UK businesses would welcome the decision.
Kern comments, ‘Inflation, though well above target, saw a fall to 4 per cent in March, and combined with subdued wage pressures, the arguments for an increase in rates have weakened considerably in recent weeks.
‘At a time when the government is tightening fiscal policy through its deficit-cutting programme, premature rate increases could have a severe impact on growth and jobs.’
