UK interest rates remain on hold
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%, as widely expected.
Interest rates have now been at this low level since March 2009 – when the economy was in the midst of recession.
Recent figures showed the economy contracted in the fourth quarter of 2010 so it was thought that the central bank may be reluctant at this stage to lift interest rates as the recovery is losing momentum.
However, the Bank has recently come under pressure to lift rates as it is forced to combat stubbornly high inflation.
Inflation is currently running at 4.4% – more than double the target but the Bank of England has said inflation will fall back to its target of 2% by 2012.
Inflationary pressures are rife throughout the world and many central banks are opting to lift rates to tame inflation.
Since last June, policymaker Andrew Sentance has voted for interest rates to be lifted to bring inflation down. Fellow policymakers, Martin Weale and Spencer Dale also voted for an interest rate rise at the last two meetings.
Earlier this week, the Engineering Employers’ Federation (EEF) urged the central bank to keep interest rates on hold.
The manufacturers’ trade body said the economy is too fragile and the MPC should delay interest rate hikes until later in the year when the recovery is secure.
It is yet unknown how the members of the Committee voted but minutes of the meeting will be published on 20 April.
Meanwhile, the Bank of England’s decision comes as the European Central Bank is widely expected to lift interest rates today from their historic low of 1% for the euro zone.