Bank of England holds interest rates at historic low

6th November 2014

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The Bank of England has kept interest rates at their record low of 0.5% for another month.

In addition, it has chosen not to extend its quantitative easing (QE) programme above the £375bn it has already spent.

The Bank’s Monetary Policy Committee (MPC) has kept the cost of borrowing on hold since March 2009 in a bid to stimulate economic growth.

Today’s decision came with little surprise and some commentators do not expect a rise until well into next year. Ben Brettell senior economist at Hargreaves Lansdown believes there is now little sign of further MPC members crossing the fence to join colleagues Ian McCafferty and Martin Weale in calling for higher rates.

He expects there is more chance that one or both hawks will admit defeat and begin voting once more to leave rates on hold.

Brettell said: “Given the outlook for inflation and wages, and the risks posed by the euro zone, I fully expect interest rates to remain on hold until the summer of 2015, and probably even longer. Indeed it would not be a surprise if they didn’t rise until 2016.”

Howard Archer, chief UK and European economist at IHS Insight believes expectations of a delayed interest rate hike will be reinforced by lower forecasts for GDP growth and consumer price inflation in late-2014 and for 2015 overall in the forthcoming Bank of England Quarterly Inflation Report for November.

He said: “We currently expect the first interest rate hike from 0.50% to 0.75% to come in mid-2015. At this stage, we do not think that the Bank of England will delay raising interest rates past mid-2015 as we do expect UK growth to hold up relatively well over the coming months, barring a major global downturn, and we also expect earnings growth to trend up in the early months of 2015.”

However, Archer added it is very possible that the Bank could hold off from raising interest rates until next August.

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