Bank of England holds interest rates at 0.5% and cuts its economic growth forecast

4th February 2016

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The Bank of England’s Monetary Policy Committee (MPC) has once again voted in favour of keeping interest rates at their historic low of 0.5% for another month.

But against recent trends, the MPC unanimously voted in favour, at 9-0, for holding the cost of borrowing at its current position. Previously Ian McCafferty, was the lone MPC voice voting for a rate rise.

The Bank also held its asset purchase, or quantitative easing programme at £375bn.

But notably it also cut its forecasts for GDP growth this year to 2.2%, down from 2.5%.

For 2017, it has lowered its prediction to 2.4%, down from 2.7%.

The current cost of borrowing is now approaching its seventh anniversary, having originally been cut to its all-time low in the middle of the financial crisis back in March 2009.

Ben Brettell, senior economist, Hargreaves Lansdown said: “The prospect of an interest rate rise continues to recede into the distance. Today’s vote to leave rates on hold wasn’t surprising in the slightest, but the fact that even arch-hawk Ian McCafferty backed down and voted for no change sends a clear indication that interest rates are going nowhere fast.

“The bigger picture is that growth remains lacklustre, but reasonably resilient. A slowdown in emerging markets combined with increased uncertainty in global financial markets was bound to weigh on growth forecasts, but the domestic economy remains in reasonable health despite these headwinds.

“Looking forward, the low oil price should continue to aid the domestic consumer, but neither wage growth nor inflation look anywhere near strong enough for the Bank of England to consider higher interest rates this year. The Bank is now basing its own forecasts on market expectations of the first rise in mid-2017.”

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