5th February 2015
The Bank of England has held interest rates at their historic low for another month.
In a bid to prop-up the British economy, the Bank’s Monetary Policy Committee (MPC), which is responsible for setting interest rates, has kept the cost of borrowing at 0.5% for nearly six years now.
Howard Archer chief UK & European economist at IHS Insight believes that it is very likely that there was a 9-0 vote within the MPC for unchanged interest rates given that inflation, which hit a 14-year low of 0.5% in December.
Archer said: “An interest rate hike before May’s general election can be ruled out to all intents and purposes. Any lingering thoughts that the Bank of England could raise interest rates in the early months of 2015 were effectively kicked into touch by Martin Weale and Ian McCafferty abandoning their call for an immediate interest rate hike at the January MPC meeting.”
Many commentators do not expect a rise this year at all and Archer thinks it is “borderline” as to whether the Bank starts to tighten monetary policy at the end of 2015 or holds fire until early 2016.
“We doubt the Bank of England will delay acting until mid-2016 as the markets have recently been expecting,” he adds.
“Significant indications as to whether the Bank of England could yet raise interest rates in 2015 will likely come from the consumer price inflation forecasts that are contained in the February Quarterly Inflation Report that comes out next week.”