9th October 2014
The Bank of England’s Monetary Policy Committee (MPC) has once again held tight on interest rates and kept the cost of borrowing at its historic low of 0.5%.
In addition, it has not broadened its quantitative easing programme above the £375bn it has already injected into the economy.
Rates have now been at 0.5% since March 2009, and the consensus expectation is that the first hike will occur early in 2015.
At the last MPC meeting, two of its members, Ian McCafferty and Martin Weale, voted to raise rates to 0.75%.
Commenting on the decision, Howard Archer, chief UK & European economist at IHS Global Insight said that while an interest rate hike is on the horizon, October always seemed too early for it to arrive.
He added: “We doubt that any more MPC members joined Martin Weale and Ian McCafferty in voting for an interest rate hike at the October meeting. There has been little indication that any of the other seven MPC members are leaning towards an immediate tightening of policy.
“We currently expect the Bank of England to first raise interest rates from 0.5% to 0.75% in February – but there looks to be a very real and mounting possibility that the bank could delay acting until nearer mid-year. Much will clearly depend on whether UK growth falters appreciably over the coming months and how much earnings move up in the 2015 pay settlements.”
For his part Archer expects that interest rates will only edge up to reach 1.25% by the end of 2015.