Interest rates: Bank of England holds rates at 0.5%

7th July 2011

The Bank's Monetary Policy Committee (MPC) has kept the base rate at 0.5%.

The European Central Bank is expected to make an annoucement on rates later today.

Mindful Money economist blogger Shaun Richards feels the Bank of England should have raised rates and because it had not done so it was considering quantitative easing "which would presumably take the form of further quantitative easing to add to the £200 billion it has already done".

He said the bank "also seems willing to see the exchange-rate of the pound fall in a not dissimilar manner to the way the Federal Reserve has wanted the US dollar to fall. If we are not careful we will be back to talk of "currency wars" again and evoking memories of the competitive devaluatons of the 1930s.

Ray Boulger at mortgage adviser John Charcol, said the intensity of the euro crisis diminished the likelihood of the MPC increasing the bank rate any time soon" but, "the question now is not whether Bank Rate will increase this year but whether it will increase next year".

Grenville Turner, chief executive of Countrywide, a mortgage broker and property services group said the MPC’s decision was unsurprising as concerns continue to grow about the lack of progress in the economic recovery.

He said: "We saw an increase in the number of sales agreed last month, however we are not seeing any significant signs of improvement in the volume of transactions, as consumer confidence continues to suffer further setbacks with the collapse of well known retailers."

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