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Tuesday 18th of January 2011
September 9, 2010    

UK interest rates remain on hold

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by Kay Murchie

The Bank of England’s Monetary Policy Committee (MPC) has today elected to keep UK interest rates on hold at the historically low level of 0.5% - where they have been since March 2009.

Furthermore, the Bank opted not to inject any more funds into the economy via its quantitative easing (QE) scheme – introduced to stimulate growth within the economy.

The move was widely expected and many economists expect no movement on interest rates until early 2011.

At the last three meetings, policymaker Andrew Sentance voted for rates to rise from their historic low and, once again, he is expected to have voted for a rate hike today because of concerns about inflationary pressures.

Minutes of the two-day meeting will be released on 22 September.

The move to hold rates comes despite stubbornly high inflation. The CPI inflation rate currently stands at 3.1% – the eighth consecutive month that inflation has been above the 2% target.

The CPI inflation rate is a benchmark for the MPC but Mervyn King, the Bank’s Governor, has already dismissed fears that higher inflation would demand a significant rise in interest rates in the months ahead.

The news comes shortly after the Office for National Statistics (ONS) revealed the UK’s trade deficit widened in July to a record high, as imports soared and exports fell.

According to the ONS, the goods trade gap widened to £8.667 billion in July, up from £7.532 billion the previous month.

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