Bank expected to hold rates

9th June 2011

The report adds that economists have put back the likely date for the next rise in rates to November as worries over growth prospects override concerns about inflation, which hit 4.5% in April, the highest level in two-and-a-half years.

While borrowers will continue to benefit from low rates, the delay is bad news for savers, who continue to suffer low rates on their money. Meanwhile, food price inflation is at its highest for two years, and energy providers are hiking charges.

David Kern, chief economist at the British Chambers of Commerce (BCC), told reporters: 'While increased utility prices and high inflation puts the MPC in an uncomfortable situation, countering this with a rise in interest rates would be a mistake. As long as wage increases remain subdued, the MPC should hold its nerve for the time being.'

Steve Richardson comments on the report, agreeing rates should be kept low – while others believe they should be raised now to curb inflation.

He says: "Low interest rates are keeping most UK households afloat in the recession. Any move to speed up interest may spoil things for the common man.

"Mortgage payments make up the largest proportion of payments from the salary packet. If food and fuel inflation rises, households can survive but if mortgage payments go up quickly that will bring the double dip with a bang. I understand some people on this forum want the housing market to collapse so they can buy for cheap but this will not happen to the extent they would like it to. The government and bank of England are following the correct strategy by keeping rates low and letting households and small business survive and rebuild their finances."

Leave a Reply

Your email address will not be published. Required fields are marked *