Despite recent pressure to cut rates, the Bank of England
’s Monetary Policy Committee
(MPC) has voted to hold the base rate at 5.5 per cent. The last change was introduced on December 6, when the rate was dropped from 5.75 per cent to the current rate.
"Given the uncertainty over the extent of the economic slowdown, the MPC was right to resist cutting interest rates today," believes Trevor Williams, chief economist for Lloyds TSB Corporate Markets.
There is growing speculation that the Bank will cut rates next month, but today's decision not to do so this month was reportedly made in order to control inflation.
"The [Bank of England's] February Inflation Report will provide a good opportunity to explain their strategy in greater detail, in particular their thoughts on the global economy and near-term inflation pressures," points out economist at RLAM, Ian Kernohan.
A number of mortgage experts are offering advice following the latest rates revelation. "Tracker mortgages are by far the most attractive proposition in 2008," according to Andrew Montlake, partner at Cobalt Capital.
However, head of Abbey mortgages, Nici Audhlam-Gardiner, says: "The decision to take out a tracker should only be made if borrowers are confident that they could withstand a further increase in rates, which is not out of the question over the next two years."
Meanwhile, director of mortgages at Alliance and Leicester, Stephen Leonard, says: "First-time buyers looking for a mortgage deal should consider taking out a fixed-rate mortgage which will give them the security of fixed monthly payments. A tracker mortgage is a good option for homeowners who are financially flexible and looking to take advantage of any further interest rate cuts during the next 12 months."
Investments will also be affected by the Bank's decision. "I believe interest rates will continue to fall globally to boost sluggish economic growth. After two years of looking unattractive, higher-rated corporate bonds now look excellent value, says M&G's Richard Woolnough.
"However I am still avoiding poorer-rated investment grade corporate bonds and particularly high yield bonds, because spreads (the excess yield over that of government bonds) are still very tight on a historical basis," he adds.
The minutes of the MPC meeting will be published at on January 23.