Base rate on hold – but for how much longer

7th April 2011

Simon Ward, chief economist at Henderson, points out that the Monetary Policy Committee kept Bank rate unchanged at 0.5% despite evidence that the medium-term inflation outlook has deteriorated since the bank's inflation report in February.

He writes:  "That report itself signalled a need for policy tightening, forecasting above-target inflation of 2.5% in two years' time if interest rates were held at 0.5%.

"The alternative projection based on market interest rate expectations was in line with the target but assumed that Bank rate would average 0.7% during the second quarter, implying a quarter-point increase in April or May."

More from Simon here.

Mindful Money economist Shaun Richards is blogging about the ECB rate rise here.

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