UK interest rates to remain on hold today

| July 7, 2011

The Bank of England’s Monetary Policy Committee (MPC) commenced its two-day rate-setting meeting yesterday and interest rates are expected to remain on hold at the record low of 0.5% – where they have been since March 2009.

The bank is presented with a dilemma as it comes under pressure to raise interest rates to combat stubbornly high inflation.

However, recent figures suggest the economic recovery is losing momentum, so the central bank is reluctant at this stage to lift interest rates as it could be harmful to the recovery.

The majority of economists believe rates will remain at the historic low this month, while no changes are expected to the quantitative easing programme.

Last month, the banka��s nine-member committee voted 7-2 to keep rates on hold – details of how the Committee voted will be published on 20 July.

The Bank of England will announce its decision today at 12:00pm.

In related news, the European Central Bank (ECB) is expected to lift rates for the euro zone in an effort to tame inflation.

Inflation for the 17-member euro zone currently stands at 2.7% – higher than the target of just below 2%.

In April, the ECB lifted rates from 1% to 1.25% – it was the first time in almost two years that rates had been raised.

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