10th December 2015
Savers hoping for a break will have to wait longer as the Bank of England’s Monetary Policy Committee (MPC) has kept interest rates at their historic low for another month.
At its monthly meeting the MPC voted by a majority of 8-1 to maintain the cost of borrowing at 0.5%.
MPC member Ian McCafferty, who has been calling for a rise since August, was once again the lone voice voting in favour of a hike.
The Bank originally slashed the base rate down to its all-time low during the financial crisis in a bid to prop up the British economy and it has now been on hold for 81 months.
Economists are not expecting to see any increase until at least the second half of next year.
Danny Cox, chartered financial planner at Hargreaves Lansdown said: “Cash savers are now facing their eighth year of miserable interest rates with only the smallest glimmer of light at the end of the tunnel. Even that may turn out to be a mirage if the economy takes a step backwards and spooks the Bank of England into keeping rates at record lows.”
In a statement, accompanying Thursday’s interest rate decision, the Bank said that while 12-month CPI inflation remained at -0.1% in October, a little more than 2 percentage points below its inflation target, it expects the cost of living to have been slightly positive in November, and is projected to rise further as some of the large falls in energy and food prices at the turn of last year, drop out of the annual comparison.
However as core inflation remains subdued, CPI inflation is expected to stay below 1% until the second half of 2016.
Cox added: “The market is now expecting a hike in the middle of next year, but this wouldn’t be the first time savers have seen their hopes of higher interest rates dashed. With inflation running at close to zero and concerns a slowing China may impact the health of the global economy, rate rises in 2016 are far from a certainty. Even when a rate rise does finally materialise, they will be small and gradual, offering little comfort to cash savers after so many years of financial pain.”