The Bank of England Monetary Policy Committee (MPC) voted again today to maintain interest rates at 0.5%.
The status quo means that the official interest rate has now been held at this record low for the 29th month and there is little on the horizon to suggest a change any time soon.
Worsening economic factors
The backdrop of this decision is clouded by the recent decline of all major economic indicators. Ian McCafferty, CBI Chief Economic Adviser, said “The flow of economic news this month has made worrying reading for the MPC, with growing evidence of a softening of the global economy combined with rising inflation expectations in the UK”
This has resulted in an unusual concord among economists that it is highly unlikely we will see any rise this year and that it could be well into 2012 before any action is taken.
Inflation v economic recovery
It seems the need to keep the economic recovery on track has taken priority over the risks of rising inflation and whilst the latter continues, a hike in interest rates remains unlikely.
This lesser of two evils may be a constant challenge to the MPC but the reality is the Consumer Price Index is currently running at 4.2% and the Retail Price Index at 5.0% which is a real cause for concern.
This announcement follows last month’s decision which was settled by a 7-2 vote in favour of keeping the rate unchanged. Full minutes of the meeting will be available later this month but the news continues to add to the woes of savers and investors alike.
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