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11th of August 2011
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Interest rates to remain low

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by Gill Montia
Interest rates to remain low

Low interest rates look set to continue, with the Governor of the Bank of England having warned that “massive” economic challenges faced by high levels of debt would only be worsened by rate hikes.

Addressing the European Parliament’s Systemic Risk Board yesterday, Mr King said: “The economic consequences of high-level indebtedness now would become more severe if rates were to rise.”

The Bank of England’s Monetary Policy Committee is therefore expected to retain the base rate at 0.5% when it meets later this week; six members of the nine-member Committee having voted against an increase in April.

The record-low rate has remained unchanged for over two years, despite inflation running well ahead of the Government’s 2% target.

However, the annual rate inflation fell to 4% in March, from February’s 28-month high of 4.4%.

Analysts had expected the rate to remain unchanged and the shift supported Mr King’s prediction that inflation will fall back to 2% by 2012.

Meanwhile, the European Central Bank hiked rates by 25 basis points last month, to 1.25%, marking the first eurozone rate increase for more than a year.

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News posted: May 3, 2011

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