News

Bank of England to hold interest rates at 0.5%

The Bank of England has voted to keep interest rates at a record low until the second half of 2016.

Last month, out of the nine rate-setters of the MPC, eight-to-one voted to hold interest rates at 0.5%, with Ian McCafferty voting to raise interest rates to 0.75% [1].

Inflation remained negative in October, below the Bank of England’s 2% target, with the current rate of interest having been in place since March 2009.

Some economists on the committee expect inflation to climb robustly next year as the dip in oil prices fades out of the annual comparison [2].

The minutes of the meeting show that policymakers concentrated on the continuing subdued inflation environment.

There has been varying degrees of opinion from top bankers and economists who are in majority favour to hold the rates. Adam Chester from Lloyds Bank is in favour of holding the rate. “Labour market conditions are not sufficiently tight to offset other disinflationary forces,” he said [2].

With David Kern, Chief Economist at the British Chambers of Commerce, stating: “Inflation is not expected to start edging up until next year, or reach target until well into 2017” [1].

The Bank of England Governor Mark Carney has recently said the Bank will move when the time is right [3].

 

[1]. BBC News. ‘Bank of England votes 8-1 to hold rates at 0.5%’. bbc.co.uk

[2]. City AM. ‘With the Bank of England set to keep interest rates at record low City A.M.’s shadow MPC votes six-three to hold’. cityam.com

[3]. The Economic Times. ‘Bank of England points to new oil price fall, slower wage growth’. economictimes.indiatimes.com