4th June 2015
The Bank of England’s Monetary Policy Committee (MPC) has held the cost of borrowing at its historic low of 0.5% for another month.
At its monthly meeting, the MPC also kept its quantitative easing (QE) programme unchanged at £375bn.
Interest rates have now been at their all time low for more than six years after being cut back during the financial crisis in a bid to prop up the British economy.
Presently economists are not anticipating any hike in the base rate until sometime in the first half of 2016, especially given that inflation went into negative territory in April and that UK economic growth slowed to 0.3% in the first three months of the year.
The Bank recently suggested in its quarterly inflation report that it was likely to increase interest rates in the middle of next year.
Howard Archer, chief UK and European economist at IHS Global Insight said: “Current robust consumer activity and signs that housing market activity is picking up suggest that an interest rate hike early on in 2016 is becoming increasingly likely, although the softer set of purchasing managers surveys for May fuel uncertainty over the economy’s current underlying strength.”
Archer added that much will clearly depend on how economic growth, earnings and productivity develop over the coming months, as well as just how quickly inflation moves up later on this year.
“We see interest rates only inching up to reach 2% by the end of 2017,” he said.